The Institute for Supply Management in the US released its most recent manufacturing data on Tuesday. The findings of the monthly ISM Manufacturing PMI Report for September have given investors enough reasons to worry.
The index contracted to 47.8 per cent from the previously recorded value of 49.1 per cent in August. This result surprised market analysts to a degree since the initial forecasts projected a hike to 50.4 per cent.
The observed tumble is owing to the previously mentioned deterioration of global investment rates, which are caused by heightened trade uncertainty.
Timothy R. Fiore, Chair of the ISM Business Survey Committee, commented on the findings of the report by stating that:
“Comments from the panel reflect a continuing decrease in business confidence. September was the second consecutive month of PMI® contraction, at a faster rate compared to August. […] Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019. Overall, sentiment this month remains cautious regarding near-term growth” [source]
The ISM Manufacturing Index has registered its seventh month of shrinkage, as the September data caused the most significant monthly contraction since June 2009.
Image source: TradingEconomics.com
As a result, the S&P 500 tumbled with 3 per cent in the two trading days following the release of the report. Waning manufacturing is indicative of a likely forthcoming slowdown of the economic growth rate, which is worrying investors.
The tumble in the price of the index seems set to test the strength of the next major support level at 2850, which is also the 61.8 per cent Fibonacci Correction.
Image source: Trendsharks ©, created with TradingView.com
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