Market Snapshot: Dow drops 200 points after best day of September as auto worker strike threatens economy

U.S. stocks saw their losses accelerate on Friday following the best day for equities this month as an auto workers strike threatened to undercut U.S. economic growth while potentially contributing to inflation.

What’s happening

  • The Dow Jones Industrial Average
    shed 196 points, or 0.6%, to 34,704.

  • The S&P 500
    fell by 41 points, or 0.9%, to 4,464.

  • The Nasdaq Composite
    declined by 177 points, or 1.3%, to 13,748.

On Thursday, the Dow rose 332 points, or 1%, its biggest gain in five weeks. The S&P 500 rose 0.8% for its largest one-day rise since Aug. 25, as a 25% gain by Arm Holdings
in its trading debut helped boost sentiment.

What’s driving markets

The start of a strike of the United Auto Workers against the Big Three U.S. automakers, Ford
General Motors
and Chrysler owner Stellantis
was receiving the bulk of the blame for driving U.S. stocks lower on Friday.

But investors were also paying close attention to a fresh batch of economic data on manufacturing and consumer sentiment, while also looking ahead to next week’s Federal Reserve policy meeting.

Some analysts worry that the auto workers strike could drive up car prices, adding more fuel to inflationary pressures that have started to re-emerge over the summer while stoking fears about the impact on the broader U.S. economy.

“It’s unsettling, especially in this period right now where we are starting to see a slowdown in economic data. When you look at the history, there’s a hit to the economy and the hit to jobs that can come from a strike like this,” said Liz Ann Sonders, chief investment strategist at Charles Schwab, during a phone interview with MarketWatch.

Stocks’ losses were underscored by rising Treasury yields, which have weighed on U.S. equities in recent weeks as borrowing costs have climbed to fresh highs. The yield on the 10-year note
rose 4.5 points at 4.332%, nearing its highest level since 2007.

More upbeat news about the state of the U.S. economy arrived early Friday in the form of the New York Fed’s Empire State business conditions index. The manufacturing gauge which measures activity in New York state rose 21 points in September to 1.9, the regional Fed bank said Friday.  Also, Fed data showed U.S. industrial production rose 0.4% in August, slightly better than economists had expected.

The latest data on U.S. manufacturing “doesn’t change the broader picture, which is that, with global manufacturing still struggling, the outlook for America’s factories remains muted too,” said economists at Capital Economics in written commentary.

Survey data released by the University of Michigan showed consumer sentiment falling for a second month in September: The preliminary reading of the sentiment survey dropped to 67.7 this month from 69.5 in August.

At the same time, the survey showed Americans think inflation will average 3.1% in the next year, down from 3.5% in the prior month and the lowest reading in two and a half years.

Upbeat news out of China had earlier helped to boost the mood across global markets, as European stocks climbed. On Friday, China said its industrial production and consumption improved in August, while investment continued to lose momentum despite Beijing’s increased efforts to stimulate economic growth.

China’s industrial production expanded 4.5% from a year earlier in August, up from the 3.7% increase in July, the National Bureau of Statistics said Friday. Also, China’s central bank cut a short-term policy rate on Friday, a day after saying it will lower the amount of deposits banks have to set aside as reserves to spur more lending as the world’s second-largest economy shows more signs of slowing.

Investors were also paying attention to the possibility of volatility driven by the expiration of $3.4 trillion in stock options. According to data from Nomura, 10 of the past 11 expiration days in September saw the S&P 500 finish lower.

Companies in focus

  • General Motors Co.
    fell alongside those of Ford Motor Co.
    while Stellantis NV
    was modestly higher after nearly 13,000 United Auto Workers at the three companies went on strike early Friday as a deadline passed with no agreement with the carmakers. The combined strike breaks with UAW tradition, which had directed strike efforts for one car company only to protect its strike fund and picket-line firepower.

  • ARM Holdings PLC
    American depositary receipts were adding to their gains from their stunning market debut after closing Thursday 25% above their IPO listing price as execs see a big opportunity in saving chip makers money.

  • Adobe Inc. shares
    fell after the software company forecast revenue in line with Wall Street estimates and steady margins as it rolls out a paid version of its Firefly AI.

  • Planet Fitness
    shares tumbled after the company announced the departure of CEO Chris Rondeau.

  • Walt Disney‘s
    stock rose after a company representative said it hasn’t yet decided on what it will do with ABC and other broadcast channels that CEO Bob Iger has suggested could be sold.

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