Indexes began the fourth quarter not unlike how they ended the third quarter. A lot of volatility and a big swoon. The S&P 500 plunged 2.96% and the NASDAQ 2.98%. Two sets of key Chinese data disappointed investors, leading to another major gap down at the open. The official manufacturing purchasing managers’ index (PMI) edged down to 49.7 in August from 50 in July, while the final Markit manufacturing PMI came in at 47.3 in August, the lowest reading since March 2009. Any reading below 50 signals contraction.
This is a big week for U.S. economic data with both ISM reports (manufacturing and non manufacturing) and the employment data Friday. The first one of the three was poor. The August ISM manufacturing index fell to 51.1 from 52.7 the prior month for its weakest read in over two years.
We had mentioned since the beginning of last week when we had a huge swoon there would be a big bounce; that was expected as so many technical indicators were at extreme oversold conditions. We also said it wasn’t the bounce the mattered but what happened after the bounce. With the action both yesterday and today, that action is obviously not positive. If you are a person without a timeline of 3+ years minimum there should be high levels of cash in your portfolio until we see conditions improve.Continue reading