The ISM Manufacturing PMI edged higher to 47.2 in August of 2024 from the November 2023 low of 46.8 in the previous month, missing market expectations of 47.5 and reflecting the 21st monthly contraction in US factory activity in the last 22 periods. The result extended the weak momentum for manufacturing in the US economy, underscoring the impact of elevated interest rates by the Federal Reserve in the sector. Surveyees noted a fresh decline in new order levels (44.6 vs 47.4 in July), the third straight decrease. Consequently, production fell at a faster pace (44.8 vs 45.9) despite another period of depletion in the backlog of orders (43.6 vs 41.7). In the meantime, employment levels fell for the 3rd straight month (46 vs 43.4), albeit at a slower pace. On the price front, costs rose at a faster pace (54 vs 52.9), firmly above market expectations that expected a slowdown to 52.5, challenging the Fed's hopes of disinflation in the economy.

source:Institue for Supply Management

Key Data

• Employment Index fell from 49.3 to 43.4.
• New Orders Index decreased from 49.3 to 47.4.
• Inventory Index dropped from 45.4 to 44.5.

The dollar held steady on Tuesday as investors awaited key U.S. economic data, including Friday's non-farm payrolls, which could solidify the Fed's decision to cut rates later this month. As of 04:05 EST (09:05 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was stable at 101.617, slightly below Monday's two-week high of 101.79. The index fell 2.2% in August due to expectations of a Fed rate cut.

U.S. stock market plunges

On September 3, U.S. stocks experienced a sharp decline across the board. Nvidia closed down 9.53%, marking its largest single-day drop since late April. Analysts attributed the drop to economic data released earlier in the day showing that U.S. manufacturing activity contracted for the fifth consecutive month in August, heightening investor concerns about a U.S. economic recession and putting pressure on U.S. stocks.

All three major U.S. indices fell: the Nasdaq dropped over 3%, the S&P 500 fell over 2%, and by the close of trading, the Dow Jones Industrial Average was down 626.15 points from the previous day, ending at 40,936.93, a decline of 1.51%; the S&P 500 fell 119.47 points to 5,528.93, a drop of 2.12%; and the Nasdaq Composite dropped 577.33 points to 17,136.30, a decline of 3.26%.

Major tech stocks saw widespread declines, with Nvidia falling over 9%, marking its largest single-day drop since late April; Google and Netflix dropped over 3%, Apple fell over 2%, and Meta, Amazon, Microsoft, and Tesla were down more than 1%. Semiconductor, precious metals, energy, and banking sectors experienced significant declines, with Koldairen Mining falling over 11%, Century Aluminum and ON Semiconductor down over 9%, Intel, GlobalFoundries, and ASE Semiconductor down over 8%, Micron Technology, NXP Semiconductors, and AMD down over 7%, and Plag Energy, TSMC, and Qualcomm down over 6%. Additionally, Boeing fell over 7%, reaching its lowest level since November 2022.

Focus on Non Farm Payroll

The ISM manufacturing index has triggered a sharp decline in U.S. stocks, and investors should closely watch the upcoming U.S. Non Farm Payroll report due this Friday. Data shows that July's Non Farm Payrolls increased by 114,000, with the unemployment rate rising to 4.3%. The ISM manufacturing PMI stands at 47.5, indicating a contraction in the manufacturing sector. Both indicators reflect an economic slowdown, intensifying market concerns. Traders are anticipating that the Federal Reserve may cut rates by 50 basis points in September, with the total rate cut for the year potentially exceeding 110 basis points. According to Bloomberg's survey, August Non Farm Payrolls are expected to rise to 165,000, with the unemployment rate expected to decrease to 4.2%.

Follow us

Find us on Twitter, Instagram, YouTube, and TikTok for frequent updates on all things investing.

Have a financial topic you would like to discuss? Head over to the uSMART Community to share your thoughts and insights about the market! Click the picture below to download and explore uSMART app！

Important Notice and Disclaimer:

We have based this article on our internal research and information available to the public from sources we believe to be reliable. While we have taken all reasonable care in preparing this article, we do not represent the information contained in this article is accurate or complete and we accept no responsibility for errors of fact or for any opinion expressed in this article. Opinions, projections and estimates reflect our assessments as of the article date and are subject to change. We have no obligation to notify you or anyone of any such change. You must make your own independent judgment with respect to any matter contained in this article. Neither we or our respective directors, officers or employees will be responsible for any losses or damages which any person may suffer or incur as a result of relying upon anything stated or omitted from this article.

This document should not be construed in any jurisdiction as constituting an offer, solicitation, recommendation, inducement, endorsement, opinion, or guarantee to purchase, sell, or trade any securities, financial products, or instruments or to engage in any investment or any transaction of any kind, nor is there any intention to solicit or invite the purchase or sale of any securities.

The value of these securities and the income from them may fall or rise. Your investment is subject to investment risk, including loss of income and capital invested. Past performance figures as well as any projection or forecast used in this article is not indicative of its future performance.

This advertisement has not been reviewed by the Monetary Authority of Singapore