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Afternoon Note

Huge Reversal

By Charles Payne, CEO & Principal Analyst
10/3/2019 1:19 PM

The ISM non-manufacturing survey missed expectations, dropping four points from August to a reading of 52.6 and well below consensus of 55.3. The service sector is still expanding – a reading above 50 percent indicates the sector is expanding – but the numbers were the lowest since August 2016.

Percentage Point Moves

 ISM Non-Manufacturing Index

While the report was a disappointment, the market is now cheering for more rate cuts ahead.  Odds are 90% for a rate cut at the end of October, and 50% now for December.  And while this is great for stocks, U.S. Treasury yields have continued to go down with the 10 year now at 1.534% and the 2 year down to 1.386%. 

The market dropped fast on the release of the ISM services/non-manufacturing report but has since had a huge reversal. At the lows:


FAANG stocks have been hit hard of late, but Facebook (FB) is helping to reversing the trend on the announcement of the camera/messaging app through Instagram.  FB is higher by 2.4%.  Snap (SNAP), however, is getting hit on the news and is down over 5%. 

S&P 500 Index



Communication Services (XLC)



Consumer Discretionary (XLY)



Consumer Staples (XLP)



Energy (XLE)



Financials (XLF)



Health Care (XLV)



Industrials (XLI)



Materials (XLB)



Real Estate (XLRE)



Technology (XLK)



Utilities (XLU)



Factory orders for August were down 0.1%, compared to an increase of 1.4% in July.  Shipments were also lower by 0.1% after dropping 0.3% in July.  Business spending slowed in August once again.


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