U.S. stocks are down Tuesday after U.S. manufacturers posted the biggest contraction in September since the end of the 2007-2009 recession, reflecting a slowdown in the U.S. and global economies that is further amplified by a protracted trade war with China.
The Institute for Supply Management released data showings its manufacturing index slumped to 47.8% last month from 49.1%, marking it the lowest level since June 2009, when the so-called “Great Recession” ended. Readings over 50% suggest business conditions are getting better, while those below 50% indicate they are worsening.
The new export orders index was just 41%, the lowest level since March 2009, down from the August reading of 43.3%, ISM data showed.
“We have now tariffed our way into a manufacturing recession in the U.S. and globally,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth,” Timothy Fiore, ISM chair, said in a statement.
“There is no end in sight to this slowdown, the recession risk is real,” Torsten Slok, chief economist at Deutsche Bank said in a note on Tuesday following the report.
While President Trump continues to blame the Federal Reserve’s maintaining elevated interest rates as the culprit for problems, manufacturers are sullen.
“Chinese tariffs going up are hurting our business. Most of the materials are not made in the U.S. and made only in China,” said an executive at a food and beverages manufacturer.
“Economy seems to be softening. The tariffs have caused much confusion in the industry,” said an executive at a company that makes electrical equipment.
Investors who believe the market is ready for a continued pullback or selloff can look into the Direxion Daily S&P 500 Bear 1X ETF (NYSEArca: SPDN).
Meanwhile investors who see this as just a pause and are looking to take advantage of renewed strength in U.S. equities can consider the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI), which offers them the ability to benefit not only from domestic U.S. markets potentially performing well, but from their out-performance compared to international markets.
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