Stock Indices: Dow Jones lower at Tuesday’s close, as Chinese manufacturing activity shrinks a 14th month, while RBA axes cash rate

On Tuesday Dow Jones Industrial Average traded within the range of 17,671.02-17,857.67. The benchmark closed at 17,750.91, retreating 0.78% (140.25 points) on a daily basis. It has been the 27th drop in the past 65 trading days and also the sharpest one since April 28th, when the gauge plummeted 1.17%. The daily low has been the lowest level since April 29th, when a low of 17,651.98 was registered. The blue-chip gauge has edged down 0.12% so far during the current month, following a 0.50% gain in April.

US equities followed the weak performance of their Asian counterparts yesterday, after Caixin Media Co. said that Chinas manufacturing activity contracted for a 14th straight month in April. The respective Manufacturing Purchasing Managers Index slowed down to 49.4 last month from a reading of 49.7 in March, while falling short of market consensus. The sub-gauge of production remained broadly unchanged, while the gauge of new orders stagnated and that of new export orders plummeted for a fifth consecutive month in April. In addition, the sub-index of employment continued to decline, due to relatively weak market conditions and subdued customer demand. Chinese business respondents to the survey stressed on cautious inventory policies, as stocks of finished goods and inputs dropped at a faster pace in April from a month ago.

An additional bearish impulse came following the Reserve Bank of Australias decision on policy. The Bank reduced the benchmark interest rate (cash rate) by 25 basis points to a new record low of 1.75% at its meeting concluded Tuesday, citing a subdued inflation outlook. RBA policy makers noted that the outlook for a sustainable economic growth would be improved by employing monetary policy accommodation. According to extracts from the Statement taken by RBA Governor, Glenn Stevens: “Inflation has been quite low for some time and recent data were unexpectedly low. While the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.”

“…the Board took careful note of developments in the housing market, where indications are that the effects of supervisory measures are strengthening lending standards and that price pressures have tended to abate. At present, the potential risks of lower interest rates in this area are less than they were a year ago.”

Among the companies included in the benchmark, 25 registered a decline and 5 recorded gains on Tuesday. The shares of United Technologies Corporation (UTX) recorded the worst performance within the Dow on May 3rd, going down 2.15% to close at $102.13. It has been the 8th drop in the past 22 trading days and also the sharpest one since February 11th, when the stock tumbled 2.64%. May 3rd low of $101.87 has been the lowest level since April 11th, when a low of $101.11 was registered. UTX stock has lost 2.15% of its value so far in May, following three consecutive months of advance. It became clear that yesterday workers at United Technologies aerospace parts division approved a labor agreement, according to which wages will be increased at at annual rate of 2.5% during the upcoming five years.

At the same time, the shares of Pfizer Inc (PFE) recorded the most notable daily increase within the DJIA on May 3rd, going up 2.74%, to close at $33.70, while marking their 13th gain in the past 22 trading days, a second consecutive one and also the sharpest one since April 6th, when the stock rose 5.01%. May 3rd high of $33.97 has been the highest price level since November 11th 2015, when a high of $34.21 was registered. In addition, the daily trading volume (71.53M) has been the highest since April 11th. Pfizer has added 3.03% to its market value so far in May, following a 10.36% surge in April. The pharmaceutical giant reported a 20% growth of its global sales to $1.3 billion during Q1.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the Wednesday pivot levels for DJIA are presented as follows:

R1 – 17,769.04
R2 – 17,786.15
R3 (range resistance) – 17,803.26
R4 (range breakout) – 17,854.59

S1 – 17,734.82
S2 – 17,717.71
S3 (range support) – 17,700.60
S4 (range breakout) – 17,649.27

By using the traditional method of calculation, the weekly pivot levels for DJIA are presented as follows:

Central Pivot Point – 17,836.76
R1 – 18,021.54
R2 – 18.269.44
R3 – 18,454.22

S1 – 17,588.86
S2 – 17,404.08
S3 – 17,156.18