October plunge by US blue-chips tops 1,000 points as dire ISM services report adds to worries over US economy

If investors thoughts things were looking bad, they got even worse on Thursday, with another plunge by Dow Jones Industrials Average bringing up the 1,000 point deficit mark for the first three sessions of October after some more grim US data heightened recession concerns.

After the first hour of trade in New York on Thursday, the Dow Jones had tumbled by over 280 points, or 1.1% to 25,797, just edging off an early low of 25,743.46. The broader S&P 500 index and tech-landen Nasdaq Composite both dropped another 0.8%.

READ: Fears over US growth and trade war escalations see investors endure a shocker of a start to October

The latest sell-off came after the US Institute for Supply Management said its non-manufacturing index fell to 52.6 last month from 56.4 in August, well below forecasts for a reading of 55.3%.

The weak services sector survey added to the pressure on Wall Street after ISM’s manufacturing index, released on Tuesday, fell to a 10-year low earlier this week.

Investors were running scared ahead of the closely watch US monthly non-farm payrolls data, due on Friday, especially after a private sector survey released on Wednesday proved disappointing.

Naeem Aslam, senior analyst thinkmarkets.com said: “So far this week, the economic numbers have been ringing the recession bells and today’s data has made them only louder. The data has plunged to three years low and it shows markets are getting clobbered.”

“The S&P500 has also taken a huge plunge on the back of this, and now, all hopes are pinned on the US NFP data. The reality is that the US NFP number alone cannot change the narrative. I think what is more important for the markets now is the speech by the Fed chairman, Jerome Powell. Investors want him to say that another rate cut is on the cards,” Aslam added.

Further signs of weakness across the US economy may prompt the Federal Reserve to lower interest rates again at its next meeting in late October following two back-to-back quarter percentage point cuts in August and September, which were the first easings in monetary policy by the Fed in over a decade.

Adding to the market chaos was news on Wednesday that the World Trade Organization had backed a US request to impose tariffs on US$7.5 billion of European goods due to the EU subsidies which were previously handed to aircraft manufacturer Airbus, potentially sparking yet another escalation in President Trump’s ongoing trade wars.

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Story by ProactiveInvestors