Market Recap: Manufacturing Expands, Greece Falls Short, Capital Goods Plummet
Markets closed down on Wall Street today: Dow -2.37%, S&P -2.85%, Nasdaq -3.29%, Oil -2.99%, Gold +2.01%.
On the commodities front, Oil (NYSE:USO) fell to $76.83 a barrel. Precious metals were up, with Gold (NYSE:GLD) climbing to $1,654.90 an ounce while Silver (NYSE:SLV) climbed 0.80% to $29.84 an ounce.
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Today’s markets were down because:
1) Manufacturing. The U.S. manufacturing sector reversed a downward trend in September, according to this morning’s ISM report, with the sector expanding at a faster rate than in the previous month. Though manufacturing has been expanding for the last 24 consecutive months, the rate at which it was expanding was slowly to snail’s pace. Last month’s reversal was rather unexpected, but unfortunately wasn’t enough to renew investors’ faith in the economy as more pressing issues took precedence.
2) Greece. The Greek cabinet announced its new budget today, which had the country cutting its deficit by less than the agreed upon figure that was part of its bailout, making it questionable whether the nation will receive its next tranche of aid, due this month, in order to prevent default. Greece was supposed to reduce its deficit to 17.1 billion euros, or 7.8% of GDP, but the newly-announced budget instead cuts the deficit to 18.69 billion euros, or 8.5% of GDP. In the past, troika officials from the EU, IMF, and European Commission, have said they will not release Greece’s next tranche of aid unless the country meets all of the requirements of its bailout package, but Greek Prime Minister George Papandreou says parliament was unable to make as many cuts because the economy had contracted more than expected, now expected to shrink 5.5% this year rather than 3.8%.
3) Capital goods. By far today’s worst-performing sector, capital goods declined 3.76% today. The sector’s most heavily traded stocks — Deere & Company (NYSE:DE), Honeywell (NYSE:HON), The Boeing Company (NYSE:BA), and Caterpillar (NYSE:CAT) — all declined more than 3% today, while stocks like Cemex (NYSE:CX), Fuel Tech (NASDAQ:FTEK), GenCorp (NYSE:GY), Manitowoc Company (NYSE:MTW), and PulteGroup (NYSE:PHM) had the most impressive losses, all declining more than 10%.