Dow Jones Industrial Average eases lower after misfire in US PMI figures

The Dow Jones shed 200 points on Thursday as investors blink.
US PMI figures came in mixed, with Services up but Manufacturing down.
Investors await further signs of Fed rate cuts.

The Dow Jones Industrial Average (DJIA) shed some weight on Thursday, easing back around 200 points after a misfire in US Purchasing Managers Index (PMI) figures gave investors a reason to pause. US PMI prints further highlighted a softening in the US labor market, sending jitters through markets, which continue to bet that a Federal Reserve (Fed) rate cut in September will solve all of their problems.

US Manufacturing PMI figures tumbled back to 48.0 in August, well below the forecast steady print of 49.6. The US Services PMI unexpectedly tick upwards to 55.2 from 55.0 compared to the forecast decline to 48.0. Despite the upswing in Services PMI numbers, underlying employment figures continue to show a shortening in the US labor market, adding to concerns that were mostly ignored when the US Bureau of Labor Statistics retroactively wiped over 800K jobs from March’s Nonfarm Payrolls (NFP) print this week.

Markets continue to pine for a September cut, but Thursday’s PMI data sparked a pullback from a recent upswing into bets that the Fed would cut 50 bps on September 18. Rate markets have pulled back to a healthier overall expectation of a single quarter-point cut in September, pricing in around 75% odds of a 25 bps rate trim.

The Jackson Hole Economic Symposium is underway in Wyoming today, and investors will be looking ahead to Friday’s expected appearance from Fed Chairman Jerome Powell. Markets are hoping that the Fed head will introduce firmer guidance on how likely the Fed is to cut in September, as well as for how much.

Dow Jones news

The Dow Jones index is easing slightly lower on Thursday, with roughly two-thirds of the index declining on the day. Losses are being led by Intel Corp. (INTC), which fell another 3.3% to $20.70 per share. Gains remain notably limited on Thursday, with the top of the board claimed by American Express Co. (AXP), which managed to eke out a 0.85% jump, climbing to $248.40 per share.

Dow Jones Price Forecast

With the Dow Jones pulling back, there is a building risk that a bearish correction could kick off with topside momentum running out of gas just below all-time highs set in July. The Dow Jones’ recent recovery is set to take a breather and give short pressure a chance to drag price action back down to the 50-day Exponential Moving Average (EMA) at 39,481.00.

Dow Jones daily chart

Economic Indicator

S&P Global Services PMI

The S&P Global Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector. As the services sector dominates a large part of the economy, the Services PMI is an important indicator gauging the state of overall economic conditions. The data is derived from surveys of senior executives at private-sector companies from the services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for USD.