Business Maverick: Stocks Drop After Big Rally on Weak Factory Data: Markets Wrap

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Stocks erased gains after data showed US manufacturing contracted in November for the first time since May 2020, tempering optimism with a report that highlighted signs inflation is abating.

weighed on the Dow Jones Industrial Average as the software company gave an outlook that reflects a weaker economy. The greenback slumped to the lowest level since August, while two-year US yields — which are more sensitive to imminent Fed moves — were flat.

The Institute for Supply Management’s gauge of factory activity slid to 49 from 50.2 in the prior month. The median projection in a Bloomberg survey of economists called for a reading of 49.7. Meantime, a key gauge of US consumer prices posted the second-smallest increase this year while spending accelerated.

“Bottom line, seeing inflation roll over and the soon to be peak in Fed rate hikes was the first mountain to climb for both the economy and markets in 2022,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “The next mountain needing to be conquered, and will be the 2023 focus I believe, is the economic consequences to such a sharp rise in interest rates, the higher cost of capital that both businesses and households have to deal with and the recession it creates.

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