Courtesy of John Nyaradi.
Stocks slipped further into the red on Monday following a trio of downbeat speeches from Federal Reserve officials.
Monday turned out to be a bad day for stocks, as a disappointing Flash U.S. Manufacturing PMI report from Markit Economics was followed by 
downbeat speeches from three Federal Reserve Officials. Although the Markit Flash U.S. Manufacturing PMI for September continued to show expansion, it declined to 52.8 from August’s final reading of 53.1. A result above 50 indicates expansion. Economists were expecting an increase to 54.0.
The financial sector had a tough day after three Federal Reserve officials gave speeches which drove home the point that the taper did not begin this month because the economy is still in bad shape. New York Federal Reserve President (and FOMC member) William Dudley spoke at the Fordham Wall Street Council and delivered a message based on the following theme:
In my view, the economy is slowly healing. But, while significant progress has been made since the end of the recession, there remain a number of headwinds that have offset the improvement in the underlying fundamentals. As a result, we have yet to see any meaningful pickup in the economy’s forward momentum.
Atlanta Federal Reserve President Dennis Lockhart (who is not an FOMC member) delivered a speech entitled “Is the U.S. Economy Losing Its Dynamism?” Here is his answer:
The question I posed at the outset was whether the economic dynamism of the United States is declining. Is America losing its economic mojo? There is some evidence to the affirmative. I believe some of what we observe can be explained by the recent recession and frustratingly slow recovery.
Dallas Federal Reserve President Richard Fisher is an FOMC alternate. Fisher was particularly annoyed by last week’s FOMC decision against the “Septaper”. Fisher concluded his speech before the Independent Bankers Association of Texas with his opinion about the “taper caper”:
Today, I will simply say that I disagreed with the decision of the committee and argued against it. Here is a direct quote from the summation of my intervention at the table during the policy “go round” when Chairman [Ben] Bernanke called on me to speak on whether or not to taper: “Doing nothing at this meeting would increase uncertainty about the future conduct of policy and call the credibility of our communications into question.” I believe that is exactly what has occurred, though I take no pleasure in saying so.
Why I Believe the Fed Made the Wrong Decision
The Dow Jones Industrial Average (NYSEARCA:DIA) lost 49 points to finish Monday’s trading session at 15,401 for a 0.32 percent decline. The S&P 500 (NYSEARCA:SPY) fell 0.47 percent to close at 1,701.
The Nasdaq 100 (NASDAQ:QQQ) declined 0.17 percent to finish at 3,219. The Russell 2000 (NYSEARCA:IWM) dipped 0.06 percent to end the day at 1,072.
In other major markets, oil (NYSEARCA:USO) sank 1.32 percent to close at $37.27. While Few See It, This Stock Sector Is Getting Risky
On London’s ICE Futures Europe Exchange, November futures for Brent crude oil declined $1.13 (1.04 percent) to $107.20/bbl. (NYSEARCA:BNO).
December gold futures fell $9.70 (0.73 percent) to $1,322.80 per ounce (NYSEARCA:GLD).
Transports encountered some bad weather on Monday, with the Dow Jones Transportation Average (NYSEARCA:IYT) declining 0.60 percent.
In Japan, there was no trading because the Tokyo Stock Exchange was closed on Monday (NYSEARCA:EWJ).
In China, stocks rallied on the Shanghai Exchange after Markit Economics reported that the HSBC Flash China Manufacturing PMI jumped to a six-month high of 51.2 from August’s 50.1. The Shanghai Composite Index jumped 1.33 percent to 2,221 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index declined 0.56 percent to end the session at 23,371 (NYSEARCA:EWH).
In Europe, stock prices fell, despite the fact that the Markit Flash Eurozone PMI for September indicated that the Composite Eurozone PMI climbed to a 27-month high of 52.1 from August’s 51.5 (NYSEARCA:VGK). The uncertain outcome from Sunday’s elections in Germany kept investors in a risk-averse mood. German Chancellor Angela Merkel’s Christian Democratic Union party won only 41.5 percent of the vote, although the CDU’s coalition partner, the Free Democratic Party failed to win the required 5 percent of the vote for participating in a coalition government. It will now be necessary for the CDU to form a coalition with the Social Democratic Party or the Green Party (NYSEARCA:EWG).
The Euro STOXX 50 Index finished Monday’s session with a 0.71 percent decline to 2,906 – remaining well above its 50-day moving average of 2,795. Its Relative Strength Index is 63.59 (NYSEARCA:FEZ).
Technical indicators revealed that the S&P 500 remained above its 50-day moving average of 1,679 despite finishing Monday’s session with a 0.47 percent decline to 1,70. Its Relative Strength Index fell from 63.02 to 58.83. Although the MACD remains above the zero line, it has assumed a slightly lower trajectory, suggesting the likelihood of a further decline.
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