What's moving markets today: October 2, 2019

8:27 a.m. ET, October 2, 2019

Expectations are rising for a Fed rate cut in October

Market expectations are rising for a Fed interest rate cut later this month.

As recently as Monday, there was a less-than 40% chance of a quarter-percentage point cut at the Fed's October 30 meeting. That has now climbed to 70%, according to the CME FedWatch Tool.

Expectations for a cut in December are now at 85%.

So what happened?

On Tuesday, the monthly manufacturing report from the Institute of Supply Management showed that US manufacturing sector contracted for a second month in a row in September.

The index, which measures month-to-month changes in the industry, dropped to its a lowest level since June 2009.

The data is helpful for those who argue that America's economy is slowing and needs stimulus in form of loser monetary policy.

Fed Chairman Jerome Powell, who has referred the two rate cuts that already happened this year "mid-cycle adjustments", might just turn more dovish as the year draws to a close.

7:52 a.m. ET, October 2, 2019

Christine Romans: Brace yourself for more comparisons to 2009

Something has been catching my eye in the daily barrage of economic data we use to monitor the economy's health. Three little words: "Weakest since 2009."

In less than 24 hours, two pieces of evidence that President Trump's trade war is moving the American economy in the wrong direction:

  • The September ISM manufacturing index contracted for a second month in a row, the weakest reading since 2009.
  • The World Trade Organization downgraded its global trade growth forecast to just 1.2% this year, down from 3% in 2018. That's the slowest growth in global trade since 2009. The WTO warns slower trade could crimp investments and jobs.

Of course, the 2009 comparison is troubling. The deep and painful Great Recession began in December 2007 and ended in June 2009. 

Economists increasingly worry trade risk could tip the US economy into recession after ten years of growth and job creation.

From the chief economist at Deutsche Bank: "There is no end in sight. The recession risk is real."

America's CFOs now list economic uncertainty as their top concern. In a recent survey 53% of CFOs said they expect the US to enter a recession prior to the 2020 presidential election. 

The president routinely blames the Fed, but business leaders, plant managers, and company bean counters in survey after survey blame economic uncertainty on the US-China trade war.

Until there is a resolution there, expect more comparisons to 2009.

7:01 a.m. ET, October 2, 2019

US futures are on the decline

Dow futures are currently down 200 points. Nasdaq and S&P futures are also moving lower.

Today's potential losses follows a rough Tuesday. The Dow closed 350 points lower after a key economic report showed that American factory activity fell for a second month in a row in September.

The ISM manufacturing index dropped to 47.8 in September, compared with the Refinitiv consensus forecast of 50.1. A level above 50 marks growth.

That was the lowest reading since June 2009, the last month of the recession, according to the Institute of Supply Management, which puts out the report.

The manufacturing sector shrank for the first time in three years in August, according to the ISM index, which measures month-over-month activity, as the effects of the trade war and slowing global demand set in.

Manufacturers cited the US-China trade war as weighing on demand and making materials more expensive, according to the ISM.

6:54 a.m. ET, October 2, 2019

The world's factories are in trouble

The world's factories are hurting because of the trade war. That much is clear.

US manufacturing activity contracted for the second month in a row in September, bucking expectations for a slight recovery. The Institute for Supply Management's closely watched manufacturing index dropped to its lowest level since June 2009.

Why? "Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019," said Timothy Fiore, chair of the ISM's manufacturing business survey committee.

A company that makes machinery cited softening demand and reduced backlogs. "The tariffs have caused much confusion in the industry," one electrical equipment, appliance and components manufacturer said.

CNN Business' Matt Egan points out: the Federal Reserve, which President Donald Trump quickly said was to blame:

It's true that a strong dollar makes it harder for US companies to export their goods. But analysts argue that it's the trade war, not the Fed, that is contributing to the dollar's strength. Nervous about the global economic slowdown and trade policy, investors are dumping foreign currencies in favor of the greenback.

Read more in today's "Before the Bell" newsletter.

6:37 a.m. ET, October 2, 2019

Today on 'Markets Now:' Invesco's Krishna Memani

Federal Reserve chair Jerome Powell has been roundly criticized by President Donald Trump for not cutting rates fast enough and by investors for possibly ignoring signs of a slowdown.

Here's a hot take for you: Powell is actually doing a good job.

Krishna Memani, vice chairman of investments at Invesco, gives rave reviews to Powell for how he handled questions in his last press conference in mid-September. The Fed cut rates again, as expected.

"It is remarkable that Powell didn't give anything away and thus preserved the operating flexibility of the Fed, something neither he nor previous Fed Chairs Janet Yellen and Ben Bernanke for that matter, were able to do," Memani wrote in a recent blog post.

Programming alert: "Markets Now" streams live from the New York Stock Exchange every Wednesday at 12:45 pm ET. Hosted by CNN Business correspondents, the 15-minute program features incisive commentary from experts.
8:17 a.m. ET, October 2, 2019

Retail sales in Hong Kong sink

Hong Kong reported dismal retail sales figures after market close. Total retail sales volume in August fell by more than 25%.

The year-on-year decline is the steepest for a single month on record, according to a government spokesperson. The plunge reflected "severe disruptions" to tourism and consumer activity caused by the protests.

Elsewhere in Asia, markets moved lower after the US reported particularly dour manufacturing data — a potentially troubling sign for the global economy:

  • Japan's Nikkei (N225) closed down 0.5%
  • South Korea's Kospi (KOSPI) sank 2%
  • Hong Kong's Hang Seng (HSI) dropped 0.2%
  • China's Shanghai Composite Index (SHCOMP) remains closed for the holidays