Mounting fears over slowing growth slam US stocks

United States stocks fell more than one percent for the second straight session on Wednesday, hitting a fresh one-month low, as a weak reading on the US jobs market added to concerns that the world’s largest economy could be cruising towards recession.

US private employers hired fewer than expected workers in September, the ADP National Employment Report showed, pointing to weakness in the labour market that has been a pocket of strength for the US economy.

The report, a precursor to the US Department of Labor’s more comprehensive jobs report due on Friday, followed in the wake of data that was released on Tuesday and that showed US manufacturing activity hit its lowest level in a decade in September.

The closely watched gauge of factory activity from the Institute for Supply Management (ISM) hit investor faith in the strength of the US economy – a key reason for a rally in the benchmark index this year – wiping off the third-quarter gains on the S&P 500 and Dow Jones Industrial Average.

Both indexes slipped below their 100-day moving averages for the first time in about a month on Wednesday. The benchmark index is now about four percent below its all-time high in July, after coming within striking distance of it two weeks ago.

A slowdown in US economic growth would remove one of the few remaining bright spots in the global economy, just as Europe appears to be flirting with recession.

Tuesday’s dismal reading on US manufacturing fell on the heels of data showing factory activity in Germany – the powerhouse economy of Europe – also hit a ten-year low last month.

Gauges of manufacturing activity in Asia are also flashing red as the ongoing US-China trade war fuels business uncertainty.

“The weakening conditions in Europe and the slowdown in China, it’s all adding up to the same thing essentially: worries that the global economy is slowing and giving investors reason to pause and take profits,” said Robert Pavlik, chief investment strategist manager at SlateStone Wealth LLC in New York City.

The US Federal Reserve, which cut interest rates for the second time this year in September, has indicated it would rely on economic data to determine future rate cuts.

Bets that the US central bank would reduce borrowing costs in October have risen to 70 percent after the ISM data, from 39.6 percent on Monday, according to CME Group’s FedWatch Tool. The Fed’s next policy meeting will be held at the end of the month.

Other crucial factors influencing investor sentiment this month include high-level trade negotiations between the US and China next week and third-quarter corporate earnings reports.