By Investors Hub
The major U.S. index futures are pointing to a lower opening on Wednesday, with stocks likely to see further downside following the sharp pullback seen over the course of the previous session.
Concerns about the economic outlook may continue to weigh on the markets following the release of a report from payroll processor ADP showing a slowdown in the pace of private sector job growth in the month of September.
ADP said private sector employment climbed by 135,000 jobs in September compared to economist estimates for an increase of about 140,000 jobs.
The report also showed a significant downward revision to the increase in private sector jobs in August, which was slashed to 157,000 jobs from the originally reported 195,000 jobs.
?Businesses have turned more cautious in their hiring,? said Mark Zandi, chief economist of Moody?s Analytics. ?If businesses pull back any further, unemployment will begin to rise.?
Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, noted the average monthly job growth for the past three months has fallen to 145,000 from 214,000 in the same time period last year.
On Friday, the Labor Department is scheduled to release its more closely watched monthly jobs report, which includes both public and private sector jobs.
Employment is expected to increase by 140,000 jobs in September after rising by 130,000 jobs in August, while the unemployment rate is expected to hold at 3.7 percent.
After an early move to the upside, stocks showed a significant downturn over the course of the trading session on Tuesday. The major averages pulled back well off their highs of the session and firmly into negative territory.
The major averages moved to the downside going into the close, ending the day near their lows of the session. The Dow plunged 343.79 points or 1.3 percent to 26,573.04, the Nasdaq slumped 90.65 points or 1.1 percent to 7,908.68 and the S&P 500 tumbled 36.49 points or 1.2 percent to 2,940.25.
The sharp pullback on Wall Street came following the release of a report from the Institute for Supply Management showing a continued contraction in U.S. manufacturing activity in the month of September.
The ISM said its purchasing managers index dropped to 47.8 in September from 49.1 in August, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to inch up to 50.1.
With the unexpected decrease, the index fell to its lowest level since hitting 46.3 in June of 2009, the last month of the Great Recession.
Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted the contraction continues six straight months of softening in manufacturing.
“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019,” Fiore said. “Overall, sentiment this month remains cautious regarding near-term growth.”
The new export orders index slid to 41.0 in September from 43.3 in August, falling to its lowest level since hitting 39.4 in March of 2009.
Economists noted the disappointing data may also reflect the ongoing strike at General Motors (GM), which has also begun to affect production at suppliers.
Meanwhile, President Donald Trump blamed the weak manufacturing data on the Federal Reserve, which he blasted as “pathetic” in a post on Twitter.
“As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!” Trump tweeted.
Brokerage stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Broker/Dealer Index down by 5.9 percent to its lowest closing level in a month.
Online brokers fell sharply after Charles Schwab (SCHW) announced plans to eliminate online trade commissions for U.S. stocks, exchange traded funds and options as part of an escalating price war.
Considerable weakness also emerged among oil service stocks, as reflected by the 3.4 percent nosedive by the Philadelphia Oil Service Index. The weakness among oil service stocks came amid a decrease by the price of crude oil.
Natural gas, networking, banking and chemical stocks also saw significant weakness on the day, moving lower along with most of the other major sectors.