Wall Street off day’s low, but still deep in the red

Stocks were sharply off again on Wall Street today, with the major US stock index benchmarks losing more than 1% in earlier trading.

Stocks have bounced off their lows but are still deep in negative territory. The Dow has now shed 6% since hitting its all-time high back in May.

The drops came in spite of US economic data that continues to signal improvement, with today’s manufacturing survey from the Dallas Fed showing very positive signs. A positive outlook for the manufacturing sector is not what is occupying investors’ minds at the moment though.

Anxiety over the future of central bank stimulus is dictating the direction of the market and the slightly more depressed global picture is outweighing the positive signs from the US, with China now looking fragile.

The Dow had fallen nearly 1% by early afternoon in New York, while the S&P 500 plummeted 1.3%. Microsoft was a notable climbing Dow-component, gaining nearly 2%.

What we’re seeing is a very jittery market, where risk demand is looking very depressed. The US dollar is benefitting from a combination of its status as a safe-haven asset and the expectations of Fed tapering.

The focus of the market may be drawn to more granular concerns in a couple of weeks when the US corporate reporting season begins to crank up again, but between now and then we could be facing an unsteady time, with short-term direction being bashed around by headlines regarding either China or the Fed.

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