The Institute for Supply Management (ISM) Manufacturing Index fell to 38.9 for October and lows not seen since the early 1980s. This dramatic drop in the index suggests the Federal Reserve will lower rates below the current 1% level at their next FOMC meeting.
The 38.9 reading is consistent with a severe recession and the Fed will need to take additional action to avoid disaster. The production component fell to 34.1 from 40.8 and employment to 34.6 from 41.8. New orders sank to 32.2 from 38.8 and the order backlogs fell to 29.5 from 35.0. The fall in those two order components suggests the November ISM will be even lower. New orders are at their lowest level since 1980.
The export orders component fell from 52.0 to 41.0 show that not only the U.S. but also the world is dropping sharply into a recession.
This was an extremely negative report and the markets are holding up extremely well as of 2:PM with minor gains. I do fear that the last hour of trading on Monday could be very negative as traders consider taking profit on their gains from last week.