It is often said the Federal Reserve is “data dependent” in its quest to accurately calibrate U.S. monetary policy. With that in mind, it may be surprising the major equity benchmarks did not do more gyrating Thursday following the release of one particularly concerning data point.
Earlier today, the August reading of the Markit manufacturing purchasing managers index check in at 49.9, the first reading below 50 in about a decade. Readings below 50 are generally considered negative, particularly if they are accrued in consecutive months. That hasn’t happened yet, but this is a data point that should not be ignored.
As has been widely noted, the Fed expects to take appropriate measures if the U.S. economy shows signs of wilting. With yesterday’s release of minutes from the Federal Open Market Committee (FOMC), it looked like some Fed members want large rate cuts.
However, that thesis may have been a short-term blow today as President of the Philadelphia Fed Patrick Harker said he doesn’t believe more monetary stimulus is needed, while Kansas City Federal Reserve Bank President Esther George said she sees the U.S. economy as still on solid ground.
Even with all that Fed speak, the Nasdaq Composite lost just 0.36% while the S&P 500 dropped 0.05%. The Dow Jones Industrial Average mustered a gain of 0.19%.
Big Boeing Bounce
In what is certainly good news because it is the largest Dow stock, frequent guest of this space Boeing (NYSE:BA) surged 4.25% on above-average volume on news that the Federal Aviation Administration (FAA) is planning to run software tests for Boeing’s 737 MAX passenger jet with newer pilots as soon as next month.
The tests are expected to involved pilots with around a year of flight time. Obviously, the results of those tests remain to be seen, but the news is the latest sign that Boeing may be able to meet investors’ expectations that the 737 MAX could be back in the air sometime before the end of 2019.
“As part of its own testing process Boeing has invited senior U.S. airline pilots to experiment with the software fix and use simulators to run scenarios similar to the ones that led to the two crashes,” according to Reuters.
Boeing is also attempting to fill hundreds of temporary jobs aimed at getting the 737 MAX back in the skies in the fourth quarter.
In late trading, Apple (NASDAQ:AAPL) was clinging to a modest gain. The company is just a few weeks away from its annual refresh of critical products, including the iPhone. Today, rumors circulated that Apple could unveil as many as three new iPhones next month as well as unveil significant upgrades to the iPad and its most popular laptops.
“Also coming in 2019: refreshed versions of the iPad Pro with upgraded cameras and faster chips, an entry-level iPad with a larger screen, new versions of the Apple Watch, and the first revamp to the MacBook Pro laptop in three years,” Bloomberg reported, citing sources familiar with the matter.
At the upcoming Apple event, investors will also likely be demanding clues and updates about Apple’s streaming entertainment effort, Apple+.
Among the worst of the day’s Dow offenders today was UnitedHealth (NYSE:UNH). Weakness in UNH shares today wasn’t a symptom of healthcare weakness because the Dow’s three other healthcare components traded slightly higher. I don’t like to speculate, but UNH slumped a day after the requirements for the next round of Democratic debates were released. Good news for UNH: supporters of Medicare For All are growing mum.
Chemicals maker Dow (NYSE:DOW) continues to be a dog with fleas. Read more about that condition as it pertains to the stock here. Today, the stock lost 2.74% after 20 mayors in France announced a ban on glyphosate, a weed killer that dozens of companies, including Dow, sell around the world.
Bottom Line on the Dow
It’s all about data right now. That and Fed Chairman Jerome Powell’s speech from Jackson Hole tomorrow. I’ve frequently mentioned the importance of the consumer in this space and there are now inklings that there is some softness on that front. Should that weakness persist, the Fed governors mentioned above may have no choice but to get on board with more rate cuts.
Todd Shriber does not own any of the aforementioned securities.