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New lows for Dow Industrials, NASDAQ and Russell

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Of the major market indexes we follow, only the S&P 500 Index (SPX.X) 807 -2.42% and S&P 100 Index (OEX.X) 403 -2.36% have not traded new 52-week lows, but a strong round of selling in the early morning has seen the Dow Industrials (INDU) 7,530 -2.2%, NASDAQ-100 Index (NDX.X) 835 -2.85%, NASDAQ Composite (COMPX) 1,169 -2.49% and Russell 2000 Index (RUT.X) 356 -1.57% traded new 52-week lows earlier this morning.

This morning's move lower was spurred by this morning's release of the Chicago Purchasing Managers reading of 48%, which was well below consensus for a reading of 53.2%. The index is at its lowest mark since 45.1% in January and levels below 50% are considered to signify a contraction in activity, while readings above 50% are considered to mark expansion.

The Chicago PMI data quickly sliced about 200-points off the Dow Industrials and sent it to a morning low of 7,461, the lowest level for the Dow since October 1998.

One bright spot in the Chicago PMI report was that the employment component rose to 46.6 from 44.6, yet remains below the "50" threshold.

The weaker than expected Chicago PMI report will not put added emphasis on tomorrow's Institute for Supply Management (ISM) index, which attempts to measure manufacturing activity on a national scale. Economists are looking for the September ISM to be little changed from August's 50.5 reading, with economists saying that a weak number below 50 could put added pressure on stocks and perhaps spur the Fed to lower interest rates.

Ian Shepherdson, chief U.S. economist with High Frequency Economics said, "The stage is now set for an awful ISM, a negative payroll number and a Fed ease next week."

Currently, all off the equity sectors, except for the Gold/Silver Index (XAU.X) 69.75 +1.6%, are showing declines. Treasuries are seeing a strong round of buying this morning with the benchmark 10-year YIELD ($TNX.X) 3.591% falling to a new multi-year low. Price action as the December 10-year Note futures (ty02z) 115.295 +0.55% breaking to new highs and has traded as high as 116.06 this morning.

Jeff Bailey

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