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Dow Jones Industrial Average News, 5/3/2016: At what point will weakening Chinese data weigh down investor sentiment and reality about the world's second-largest economy?
A lackluster manufacturing number didn't do anything to hold back the markets on Monday, but investors are waking up to today's report that manufacturing activity in Chinese factories declined for the 14th consecutive month.
The country has engaged in multiple rounds of stimulus and currency devaluations in an effort to spur economic growth. However, it's become increasingly clear that China's economy isn't close to maturation and that Keynesian efforts to boost the country's growth rate are stalling.
That doesn't mean that the country won't continue to do the same thing over and over again, fueling more debt, more stimulus, and further devaluations. Economists stay true to their theories, even if the real problems with China's economy center on badly needed reforms.
Here's today's top stock market news, stocks to watch, ways to profit, and economic calendar for May 3, 2016.
What's Moving the Dow Jones Industrial Average Today: Chinese Manufacturing Data
Dow Jones futures projected that the index planned to surrender roughly all of Monday's triple-digit gains as traders worried about the weakness in the Chinese manufacturing sector. Investors will be looking for guidance on the U.S. economy today when two members of the U.S. Federal Reserve offer speeches later this afternoon.
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Here's a breakdown of why the Dow is pushing lower this morning.
- First up, China's continued economic weakness is having a profound impact on the countries that rely on it for international trade and growth. This morning Australia – which considers China its largest export market – set a new record by slashing its baseline interest rate to 1.75%. The decision surprised markets around the globe as economists didn't anticipate the change to monetary policy. However, Australia's economy has been badly hit over the last year due to declines in commodity prices and the economic slowdown that has plagued China.
- On the economic front, pay attention to monthly U.S. auto sales. The automotive industry struggled over the first quarter of 2016, suppressing manufacturing levels and retail sales here in the United States. Investors would cheer a gain in April. So too would shareholders of Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM).
- Oil prices slipped on Tuesday morning on concerns about a global supply glut. Increased output from the Middle East and the North Sea surprised traders. Reports indicate that Iran has already doubled its daily production to 2 million barrels since Western economies lifted sanctions over the nation's nuclear program.
Now here's your list of top stocks to watch in today's market, plus today's economic calendar:
Companies to Watch in the Stock Market Today
- Shares of Biogen Inc. (Nasdaq: BIIB) were sliding in pre-market hours despite news that the firm plans to spin off its hemophilia division as a unique publicly traded firm. The decision is the firm's latest effort to spur shareholder value as the stock attempts to slump from a massive decline over the last 12 months.
- The deals keep coming. Oracle Corp. (NYSE: ORCL) announced plans to purchase cloud-services provider Opower Inc. (NYSE: OPWR) for more than $500 million. The deal suggests the firm is on a buying spree in the cloud-services space. Last week, Oracle purchased Textura for $663 million.
- Next, a busy day of earnings puts a number of Blue Chip stocks in focus. Early this morning, shares of drug manufacturer Pfizer Inc. (NYSE: PFE) gained nearly 3% after the firm beat Q1 earnings expectations by $0.12 and raised its annual earnings forecast. But don't get too excited. As our Capital Wave Specialist Shah Gilani explains, Wall Street has been playing a big game with investors this earnings season by setting unreasonably low expectations. Here's what Shah had to say about Wall Street's latest con and what it means for your money.
- Pay attention to an earnings report from oilfield services giant Halliburton Co. (NYSE: HAL) after the bell today. The report comes a day after the firm called off its planned $28 billion merger with rival Baker Hughes Inc. (NYSE: BHI). The companies cited rising regulatory challenges, particularly news that the U.S. Justice Department had sued to block the deal. The deal would have combined the second- and third-largest companies in the sector. It would have also created a de factor duopoly between the newly formed firm and industry leader Schlumberger Ltd. (NYSE: SLB).
- On the earnings front, also look for additional reports from CVS Caremark Corp. (NYSE: CVS), Illumina Inc. (Nasdaq: ILMN), Cummins Inc. (NYSE: CMI), Devon Energy Corp. (NYSE: DVN), and CBS Corp. (NYSE: CBS).
Today's U.S. Economic Calendar (all times EDT)
- Gallup US ECI at 8:30 a.m.
- Redbook at 8:55 a.m.
- Cleveland Federal Reserve President Loretta Mester speaks at 10:30 a.m.
- 4-Week Bill Auction at 11:30 a.m.
- Atlanta Federal Reserve President Dennis Lockhart speaks at 7 p.m.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.