U.S. stocks closed lower Thursday after renewed worries about a U.S. - China trade deal, more evidence of a slowdown in manufacturing, and mixed corporate earnings.
The weaker tone followed a record close for the S&P 500 after the Fed cut rates for the third time this year, while also signaling that it would pause before making any further moves on monetary policy.
How are major indexes performing?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.20% closed 140.46 points, or 0.5%, lower, at 27,046.23, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.83% declined 9.21 points, or 0.3%, to finish at 3,037.56. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.74% fell 11.62 points, or 0.1%, to end at 8,292.36. All three indexes ended well off session lows.
The major indexes scored monthly gains, with Dow hanging on to a 0.5% October rise, while the S&P 500 rose 2% and the Nasdaq advanced 3.7%.
What’s driving the market?
Chinese officials are expressing doubts about their ability to reach a comprehensive, long-term trade deal with the U.S. despite progress toward signing a “phase one” agreement, Bloomberg reported Thursday. However, early Thursday President Trump took to Twitter to assuage fears that the cancellation of the Asia-Pacific Economic Cooperation meeting scheduled for next month, where the president and China’s Xi Jinping were expected to agree to a “phase 1” trade deal would impinge on progress in the trade talks.
In U.S. economic data, there was more evidence of a slowdown in manufacturing with the Chicago purchasing-managers index falling to 43.2 in October from 47.1 in September, below the 48.3 consensus expectation, according to Econoday.
The poor reading can be blamed in part to the recently-ended worker strike at General Motors /zigman2/quotes/205226835/composite GM +2.96% , argued Joseph Brusuelas, chief economist at RSM, in a tweet . “But make no mistake about it the domestic manufacturing sector is in recession for reasons beyond the strike,” he wrote.
The number of Americans newly applying for jobless benefits ticked up by 5,000 to 218,000 in the week ended Oct. 26, though that reading remained near historic lows. Compensation costs for American workers rose 0.7% in the third quarter, the Labor Department said Thursday morning. Year-over-year, costs rose 2.8%, a slight increase from the 2.7% rise in June.
Americans increased spending in September for the seventh consecutive month, up 0.2%, while personal income rose 0.3%. Core inflation rose 1.7% last month, according to the Fed’s preferred PCE measure, down from 1.8% in August, and below the central bank’s 2% target.
“Recent green shoots have many investors asking: is global growth bottoming?,” Bank of America Merrill Lynch economist Ethan Harris said. “This, in turn, helped trigger a mini risk-on trade in markets. Unfortunately, we think it is too early to call a turn. While there have been a few hopeful signs in recent releases, overall the data are still weakening.”
On Wednesday, the Fed cut its benchmark interest rate for the third time in as many meetings on Wednesday, as expected, but signaled it may pause before making further changes to its monetary policy settings to see whether those steps would be enough to sustain the economic expansion.
On the corporate earnings front, reports from Apple Inc. /zigman2/quotes/202934861/composite AAPL +1.51% and Facebook Inc. /zigman2/quotes/205064656/composite FB +0.04% released late Wednesday were well received. Facebook shares were up 2.4% after announcing results that soundly beat earnings forecasts and topped revenue expectations.