Wall Street barely budged in extremely quiet trading Monday as investors largely overlooked a weak reading on the manufacturing sector ahead of the election. The session was the calmest in recent memory, with the Dow Jones industrials moving in a range of just over 130 points — far from the huge swings it suffered in October –– and ending down less than one tenth of a percent.
Stocks showed no lasting impact from the Institute for Supply Management report that its measure of U.S. manufacturing activity fell last month to its lowest level in 26 years as credit conditions tightened and disruptions remained from Hurricane Ike. The trade group said its index of manufacturing activity fell to 38.9 in October from 43.5 in September, the weakest reading since September 1982, when the country was in a recession, and well below the 41.5 economists predicted, according to Thomson/IFR.
A separate report showed construction spending fell by a smaller-than-expected amount in September as a rebound in nonresidential activity helped offset further weakness in home building. The Commerce Department said construction spending fell by 0.3 percent in September, less than the 0.8 percent decline many economists expected.
Major auto companies reported weak sales for the month of October on Monday. General Motors Corp. said its U.S. sales plunged 45 percent in October because of weak consumer confidence and tight credit markets. Ford Motor Co. said its sales fell 30 percent, while Toyota Motor Corp.'s dropped 23 percent as low consumer confidence and tight credit combined to scare customers away from showrooms.
The data, particularly on manufacturing, support the growing belief that the economy is in recession, hurt by a drop in lending and slower overall spending. But with the Dow Jones industrial average having tumbled more than 14 percent in October — its worst month in 21 years — the market priced in a significant falloff in economic activity. Wall Street must now determine whether the selloff in stocks is adequate, not enough or overdone.
Stephen Massocca, co-chief executive of Pacific Growth Equities, said the economic readings weren't a surprise given the hits the economy has taken from the evaporation of lending since September. He said Wall Street's tepid reaction also reflects the market's process of forming a bottom after its selloff. Investors are also waiting to make big bets until after the election, he said.
"What we've seen was a rally last week taking a dire depression off the table, and I think now what we have is a severe recession," he said. "By and large, the economy is bad but it's not as bad as many people think it is. There are still people going to work every day.
"With the election tomorrow, obviously people probably want to wait and see what happens there. I think that's probably holding people back," Massocca said.
At the closing bell the Dow fell 5.18, or 0.06 percent, to 9,319.83, having traded in a range of just 156 points.