https://www.howestreet.com/2024/08/were-coming-to-the-most-dangerous-month-for-stocks-mark-leibovit/
DANGER DANGER WILL ROBINSON
Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people's savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments.
~ Ayn Rand
Renewed Economic Concerns Contribute To Sell-Off On Wall Street
Stocks moved sharply lower over the course of the trading day on Tuesday, with the major averages more than offsetting the strong gains posted last Friday. With the steep drop, the Dow pulled back well off the record closing high set in the previous session.
The major averages climbed off their worst levels going into the close but continued to post significant losses. The Nasdaq plunged 577.33 points or 3.3 percent to 17,136.30, the S&P 500 dove 119.47 points or 2.1 percent to 5,528.93 and the Dow tumbled 626.15 points or 1.5 percent to 40,936.93.
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The sell-off on Wall Street came after the Institute for Supply Management released a report showing a continued contraction by U.S. manufacturing activity in the month of August.
The ISM said its manufacturing PMI inched up to 47.2 in August from 46.8 in July, but a reading below 50 still indicates contraction. Economists had expected the index to rise to 47.5.
The data led to renewed concerns about the economic outlook, which contributed to the sell-off seen in early August.
"Manufacturing employment shrank for the third consecutive month as manufacturing activity slowed in recent months," said Jeffrey Roach, Chief Economist for LPL Financial.
He added, "Although the manufacturing sector holds a smaller portion of the macro economy now than in previous cycles, investors should still position themselves for a broader slowdown throughout the balance of this year."
A separate report released by the Commerce Department unexpectedly showed a modest decrease by U.S. construction spending in the month of July.
The weakness on Wall Street also came as some traders look to cash in on the previous session's gains amid lingering uncertainty about the outlook for interest rates.
The Federal Reserve is almost universally expected to lower rates at its next meeting later this month, but there is some disagreement about the pace of rate cuts.
According to CME Group's FedWatch Tool, there is a 63.0 percent chance of a quarter point rate cut later this month and a 37.0 percent chance of a half point rate cut.
Monthly jobs data will be in focus later this week, with economists currently expecting employment to climb by 165,000 jobs in August after rising by 114,000 jobs in July.
The unemployment rate is expected to edge down to 4.2 percent in August after rising to 4.3 percent in July, reaching its highest level since October 2021.
Semiconductor stocks pulled back sharply after turning in a strong performance last Friday, resulting in a 7.8 percent nosedive by the Philadelphia Semiconductor Index. AI darling and market leader Nvidia (NVDA) plummeted by 9.5 percent.
Substantial weakness was also visible among steel stocks, as reflected by the 5.1 percent plunge by the NYSE Arca Steel Index.
U.S. Steel (X) helped lead the sector lower, tumbling by 6.1 percent after Vice President Kamala Harris expressed opposition to the sale of the steel producer to Japan's Nippon Steel.
Oil service stocks also saw significant weakness amid a steep drop by the price of crude oil, dragging the Philadelphia Oil Service Index down by 4.9 percent.
Gold, computer hardware and housing stocks also showed notable moves to the downside, while interest rate-sensitive utilities stocks were among the few groups to buck the downtrend.
Other Markets
In overseas trading, most stock markets across the Asia-Pacific region saw modest weakness during trading on Monday. Japan's Nikkei 224 Index closed just below the unchanged line, while China's Shanghai Composite Index dipped by 0.3 percent.
The major European markets showed more significant moves to the downside on the day. While the German DAX Index slumped by 1.0 percent, the French CAC 40 Index slid by 0.9 percent and the U.K.'s FTSE 100 Index fell by 0.8 percent.
In the bond market, treasuries regained ground after trending lower over the past several sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 6.7 basis points to 3.844 percent.
Looking Ahead
Reports on the U.S. trade deficit, factory orders and job openings may attract attention on Wednesday along with the Fed's Beige Book.
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Yes, that's a cartoon of me. Louis Rukeyser had us dressed up in 'elf' costumes on the screen broadcast each week. I've dated myself. That occurred for me between 1988-1996. Lou didn't like any bearish comments, so myself and other elves got dumped in 1996.
WHO am I?
MARK LEIBOVIT is Chief Market Strategist for LEIBOVIT VR NEWSLETTERS a/k/a VRTrader.Com. His technical expertise is in overall market timing and stock selection based upon his proprietary VOLUME REVERSAL (TM) methodology and Annual Forecast Model.
Mark's extensive media television profile includes seven years as a consultant ‘Elf’ on “Louis Rukeyser’s Wall Street Week” television program, and over thirty years as a Market Monitor guest for PBS “The Nightly Business Report”. He also has appeared on Fox Business News, CNBC, BNN (Canada), and Bloomberg, and has been interviewed in Barrons, Business Week, Forbes and The Wall Street Journal and Michael Campbell's MoneyTalks.
In the January 2, 2020 edition of TIMER DIGEST MAGAZINE, Mark Leibovit was ranked the #1 U.S. Stock Market Timer and was previously ranked #1 Intermediate U.S. Market Timer for the ten year period December, 1997 to 2007.
He was a 'Market Maker' on the Chicago Board Options Exchange and the Midwest Options Exchange and then went on to work in the Research department of two Chicago based brokerage firms. Mr. Leibovit now publishes a series of newsletters at www.LeibovitVRNewsletters.com. He became a member of the Market Technicians Association in 1982.
Mr. Leibovit’s specialty is Volume Analysis and his proprietary Leibovit Volume Reversal Indicator is well known for forecasting accurate signals of trend direction and reversals in the equity, metals and futures markets. He has historical experience recognizing, bull and bear markets and signaling alerts prior to market crashes. His indicator is currently available on the Metastock platform.
His comprehensive study on Volume Analysis, The Trader’s Book of Volume published by McGraw-Hill is a definitive guide to volume trading. It is now also published in Chinese. Mark has appeared in speaking engagements and seminars in the U.S. and Canada.
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