The Wall Street Journal - 23.08.2019

THE WALL STREET JOURNAL. ***** Friday, August 23, 2019 |B11

MARKETS

AUCTION RESULTS
Here are the results of Thursday's Treasury auctions.
All bids are awarded at a single price at the market-
clearing yield. Rates are determined by the difference
between that price and the face value.
FOUR-WEEK BILLS
Applications $142,702,027,200
Accepted bids $55,000,487,200
" noncompetitively $1,537,785,200
" foreign noncompetitively $0
Auction price (rate) 99.839778
(2.060%)
Coupon equivalent 2.098%
Bids at clearing yield accepted 12.87%
Cusip number 912796VW6
The bills, dated Aug. 27, 2019, mature on Sept. 24,
2019.
EIGHT-WEEK BILLS
Applications $114,299,951,200
Accepted bids $40,000,011,200
" noncompetitively $229,951,200
" foreign noncompetitively $0
Auction price (rate) 99.691222
(1.985%)
Coupon equivalent 2.024%
Bids at clearing yield accepted 88.24%
Cusip number 912796WA3
The bills, dated Aug. 27, 2019, mature on Oct. 22, 2019.
29-YEAR, SIX-MONTH TIPS
Applications $18,927,012,800
Accepted bids $7,000,015,200
" noncompetitively $10,931,400
Auction price (rate) 115.685230
(0.501%)
Interest rate 1.000%
Bids at clearing yield accepted 48.33%
Cusip number 912810SG4
The Treasury inflation-protected securities, dated
Aug. 30, 2019, mature on Feb. 15, 2049.

The 10-year Treasury yield

settled at 1.613% from 1.577%

Wednesday, while the two-year

yield rose to 1.606% from

1.569%.

Investors were also monitor-

ing the Jackson Hole, Wyo.,

symposium where central-bank

leaders from across the globe

are meeting to discuss issues

facing world economies. Ana-

lysts and investors are focused

on Federal Reserve Chairman

Jerome Powell’s speech sched-

uled for Friday, where he could

offer clues on central-bank pol-

icy.

“It really is all on Powell’s

shoulders,” said Craig Erlam, a

senior market analyst for FX

brokerage Oanda.

Minutes released Wednesday

from the Fed’s latest policy

meeting showed officials saw

their move to cut interest rates

last month as a “recalibration,”

rather than the start of a more

aggressive easing cycle.

“The market is looking for

reassurance from the Fed that

more rate cuts could be com-

ing,” said Matt Nadeau, wealth

26252.24. The technology-laden

Nasdaq Composite slid 28.82

points, or 0.4%, to 7991.39.

Investors also continued to

parse earnings results from the

retail sector, which have helped

ease some of the fears about

slowing economic growth.

Shares ofDick’s Sporting

Goodsadded $1.18, or 3.6%, to

$34.15, after the retailer posted

its first uptick in same-store

sales in roughly two years and

raised its outlook for the fiscal

year.

Nordstromclimbed $4.21, or

16%, to $30.75, after the depart-

ment-store operator beat dialed-

down expectations for its sec-

ond-quarter earnings.

L Brands, however, slid 70

cents, or 3.5%, to $19.33, after

the company’s revenue fell in its

latest quarter as sales at its flag-

ship Victoria’s Secret chain

dropped further.

Elsewhere, weak data from

Germany added to fears that

slowing global growth could be

spilling over to the U.S., and the

bond market sent a fresh warn-

ing about the risk of a potential

recession.

The yield on the 10-year

Treasury note briefly fell below

two-year yields again, following

a similar move last week.

The inversion between short-

and long-term yields is viewed

as a recession signal.

adviser at Piershale Financial

Group.

Meanwhile, the Stoxx Europe

600 fell 0.4% after minutes

from the European Central

Bank showing broad support

for prolonged stimulus mea-

sures failed to ease recession

concerns.

Data on activity in the manu-

facturing and services sectors

for Germany and France showed

small rises, beating forecasts.

Florian Hense, an economist

for Berenberg Bank, said he re-

mained concerned about a po-

tential recession amid threats

to German exports from the

Trump administration’s talk of

tariffs on European car manu-

facturers.

“The numbers today neither

discredit that nor really confirm

it,” he said. “What it confirms is

that the domestic side of the

economy is still holding up

pretty well.”

In commodities, U.S. crude oil

fell 0.6% to settle at $55.35 a

barrel. Gold prices slipped 0.5%

to $1,497.30 a troy ounce.

At midday Friday in Tokyo,

the Nikkei was up 0.2%. Also

early in the day, Hong Kong’s

Hang Seng Index was up 0.4%,

the Shanghai Composite was up

0.5%, South Korea’s Kospi was

was down 0.1% and Australia’s

S&P ASX 200 was up 0.3%. The

dollar was up 0.1% to ¥106.56.

The S&P 500 stalled after

weaker-than-expected manufac-

turing data raised worries over

the economy’s health.

The broad index slipped 1.48

points, or 0.1%, to 2922.95 as de-

clines in materials stocks offset

gains in financial shares.

A gauge of manufacturing ac-

tivity, IHS Markit’s flash manu-

facturing pur-

chasing

managers index,

clocked in at

49.9 for August.

That was the lowest reading

since 2009 and an indication

that manufacturing activity,

which is defined as expanding

when readings are above 50,

contracted for the first time in

years.

“The data raise a red flag that

manufacturing is contracting,”

said Carter Henderson, portfolio

specialist and director of institu-

tional development at Fort Pitt

Capital Group. “The U.S. con-

sumer remains abundantly

strong while manufacturing has

been taking a hit amid increas-

ing uncertainty over trade with

China.”

The Dow Jones Industrial Av-

erage initially tumbled on the

data, before ending the session

up 49.51 points, or 0.2%, to

BYJESSICAMENTON

ANDCAITLINOSTROFF

S&P Slips on Economy Red Flag

Monday Tuesday Wednesday Thursday

Four-dayindexandsectorperformance

Source: FactSet

4

–1

0

1

2

3

%

ConsumerDiscretionarySector S&P500 MaterialsSector

THURSDAY’S

MARKETS

The group has fallen 3.7% in August and manufacturing data released Thursday added to the pressure, with Caterpillar sinking 10% and Deere losing 6.2%.

WANG CHUN/VISUAL CHINA GROUP/GETTY IMAGES

Those reports gave investors

additional reasons to shy away

from the industrial sector.

The group has fallen 3.7% in

August, more than the broader

S&P 500’s 1.9% decline. Cater-

pillar has lost 10%, while farm-

machinery makerDeere&Co.

has fallen 6.2%, and power and

hand tool maker Stanley Black

& Decker Inc. has dropped 6%.

Shares of transportation

companies that help move raw

goods and materials around

the country have also taken a

hit. The Dow Jones Transpor-

tation Average, which tracks

truckers, railroads and air-

lines, is down 5.9% for the

month, on track for its biggest

monthly decline since May.

The slide in industrial

stocks matters to investors be-

cause many have been trying

to gauge whether increasingly

disappointing manufacturing

data are foreshadowing a

broader pattern of economic

decline or just showing iso-

lated weakness for now.

Activity in the services sec-

tor has remained strong for

the most part. That is a reas-

suring sign for investors, who

note that manufacturing activ-

ity, while important, accounts

for a relatively small portion

of overall economic growth.

The bad news: Downturns in

the manufacturing sector have

typically preceded weakening

in the services sector over the

past 25 years, according to Si-

mon MacAdam, global econo-

mist at Capital Economics.

The caveat? “The extent of

the slowdown has varied a lot

and has depended on broader

economic conditions than sim-

ply the health of the manufac-

turing sector,” Mr. MacAdam

said in a research note.

pound on the Comex division

of the New York Mercantile

Exchange. Prices earlier this

month hit $2.537, the lowest

level since 2017.

A widely followed measure

of manufacturing activity, IHS

Markit’s flash reading for the

manufacturing purchasing

managers index, clocked in at

49.9 for August.

That was the lowest read-

ing since 2009 and an indica-

tion that manufacturing activ-

ity, which is defined as

expanding when readings are

above 50, contracted for the

first time in years.

A Federal Reserve Bank of

Kansas City factory index also

indicated contraction.

The U.S. numbers dovetail

with data from other major

economies showing a slump in

manufacturing, a negative de-

velopment for copper.

The metal tends to be sen-

sitive to economic data be-

cause it is a component in ev-

erything from smartphones to

refrigerators.

Net bearish bets on copper

in futures markets hit their

highest level in around three

years earlier this month.

That is a sign that investors

have grown increasingly pessi-

mistic on the outlook for the

metal amid slowing global

growth and a weakening Chi-

nese economy.

China is one of the world’s

largest copper consumers, ac-

counting for some 45% of

global demand.

In precious metals, gold for

August delivery fell 0.5% to

$1,497.30 a troy ounce.

U.S. oil dropped 0.6% at

$55.35 a barrel. Brent crude,

the global benchmark, was

down 0.6% to $59.92 a barrel.

The price of copper fell

Thursday, putting the metal

within striking distance of a

fresh multi-

year low as

weak U.S.

manufacturing data added to

concern over the health of the

global economy.

Copper for August delivery

dropped 1.1% to $2.5535 a

BYIRAIOSEBASHVILI

Copper Price Falls Toward a Fresh Multiyear Low

COMMODITIES

One of the hardest-hit areas

of the stock market in recent

months is under fresh pres-

sure after a series of reports

showed the manufacturing

sector in decline.

Industrial stocks, ranging

from heavy-machinery manu-

facturers likeCaterpillarInc.

to engine maker Cummins

Inc., have lagged behind the

S&P 500 as investors have

grown increasingly worried

about the sector’s health.

Economic data released

Thursday added to the group’s

woes. One key gauge of manu-

facturing activity, IHS Markit’s

flash manufacturing purchas-

ing managers index, clocked in

at 49.9 for August. That was

the lowest reading since 2009

and an indication that manu-

facturing activity, which is de-

fined as expanding when read-

ings are above 50, contracted

for the first time in years.

Data from the Federal Re-

serve Bank of Kansas City

showed its manufacturing

composite index declining to

minus 6 in August from minus

1 in July.

BYAKANEOTANI

Investors Shy Away From Industrial Stocks

BigLaggard

Industrialstockshavebeen

oneoftheworst-performing

sectorsintheS&P500

thismonth.

Sectorperformance,

monthtodate

Source: FactSet

Share-priceandindexperformance,monthtodate

0

–14

–12

–10

–8

–6

–4

–2

%

Aug. 5 12 19

S&P500

Caterpillar

Deere

Cummins

Real

estate

Utilities

Consumer

staples

Healthcare

Consumerdiscretionary

Informationtechnology

Communicationservices

Materials

Industrials

Financials

Energy

41%

4

17

–4

–12

–14

–23

–37

–3.7

–6

–81

U.S. Treasurys sent a fresh
warning about the economy
Thursday on a report showing
that manufacturing activity
slowed this month to the low-
est level in almost 10 years.
The yield on the benchmark
10-year Treasury note briefly
fell below the yield on the
two-year note but recovered to
settle higher for a second day.
The 10-year yield ended at
1.613%, compared with 1.577%
Wednesday. The
yield on the two-
year note settled
at 1.606%.
Investors and economists
pay close attention to the dif-
ference between the two yields
because longer-term rates
have fallen below shorter-term
ones before the past seven re-
cessions.
Yields, which fall when
bond prices increase, slid after
IHS Markit said that business
activity declined this month in
both the service and manufac-
turing sectors.
The manufacturing index
fell to 49.9 from 50.4, while
the measure of services activ-
ity declined to 50.9 from 52.6.
The phenomenon of longer-
term yields falling below
shorter-term ones is known as
an inverted yield curve.
The gap between yields on
Treasurys maturing in three
months and 10 years, also
closely watched, has been in-
verted for most of the past
three months.
“If there’s a single indicator
you could use to predict a re-
cession it would be the yield
curve,” said Priya Misra, head
of interest-rate strategy at TD
Securities. “It’s a global
growth slowdown we’re facing,
and over time it will spill into
the U.S.”
Investors are looking ahead
to Friday when Federal Re-
serve Chairman Jerome Powell
addresses the Federal Reserve
Bank of Kansas City’s annual
conference in Jackson Hole,
Wyo., for clues about what
plans policy makers may de-
ploy to help sustain the expan-
sion.
Minutes from the Fed’s July
meeting, released Wednesday,
show that central bankers
have been divided about what
approach to take to maintain
growth as the U.S. economy
decelerates and signs of stress
around the world proliferate.
Two officials dissented
from the July decision to re-
duce rates, Kansas City Fed
President Esther George and
Federal Reserve Bank of Bos-
ton President Eric Rosengren.
Ms. George and Federal Re-
serve Bank of Philadelphia
President Patrick Harker each
said Thursday that the central
bank doesn’t need to cut rates
further after reducing them in
July.
The WSJ Dollar Index,
which measures the currency
against a basket of 16 others,
declined by less than 0.1% to a
recent 91.28. The dollar fin-
ished New York trading down
0.2% at 106.4420 Japanese
yen. It also ended the day
down 1% against the British
pound, its largest one-day
drop since May.

BYDANIELKRUGER

Treasurys

Fall, Yield

Curve

Inverts

Briefly

CREDIT
MARKETS