U.S. Stocks Waver on Disappointing Manufacturing Data

The S&P 500 flipped between small gains and losses Thursday after weaker-than-expected manufacturing data raised fresh worries over the health of the economy.

The broad index ticked up 0.1%, as declines in material stocks offset gains in financial shares. The Dow Jones Industrial Average climbed 98 points, or 0.4%, while the Nasdaq Composite slid 0.2%.

Stocks initially tumbled in morning trading after preliminary manufacturing data showed U.S. factory activity slowed in August. The Markit manufacturing purchasing managers index fell to 49.9 in August, dropping below 50 for the first time in about a decade.

Weak data out of Germany also added to fears that slowing global growth could be spilling over to the U.S., and the bond market sent a fresh warning about the risk of a potential recession.

The yield on the 10-year Treasury note briefly fell below two-year yields, following a similar move last week. The inversion between short and long-term yields has been widely viewed as a possible recession signal.

The 10-year Treasury yield rose to 1.603% from 1.577% Wednesday, according to Tradeweb.

"The data raises a red flag that manufacturing is contracting," said Carter Henderson, portfolio specialist and director of institutional development at Fort Pitt Capital Group. "The U.S. consumer remains abundantly strong while manufacturing has been taking a hit amid increasing uncertainty over trade with China."

Investors were also monitoring the Jackson Hole symposium where central bank leaders from across the globe are meeting to discuss issues facing world economies. Analysts and investors were particularly focused on Federal Reserve Chairman Jerome Powell's speech scheduled for Friday, where he could offer clues on central bank policy moving forward.

"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 coming," said Matt Nadeau, wealth advisor 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 measures failed to ease recession concerns.

The minutes came after earlier eurozone data on activity in the manufacturing and services sectors for Germany and France showed small rises, beating forecasts.

Although the German data were better than expected, Florian Hense, an economist for Berenberg Bank, said he remained concerned about a potential recession amid threats to German exports from the Trump administration's talk of tariffs on European car manufacturers.

"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."

Investors continued to parse earnings results in the retail sector, which have helped ease some of the fears about slowing economic growth.

In Thursday's action, shares of Dick's Sporting Goods added 3.3% after the retailer posted its first uptick in same-store sales in roughly two years and raised its outlook for the fiscal year. Nordstrom climbed 14% after the department-store operator beat dialed-down expectations for its second-quarter earnings.

L Brands, however, slid 5.5% after the company's revenue fell in its latest quarter as sales at its embattled flagship Victoria's Secret chain dropped further.

In commodities, U.S. crude oil ticked up 0.1% to $60.35 a barrel. Gold prices slipped 0.5%.

Elsewhere, Asian stocks were mixed, with the Shanghai Composite up 0.1%, Hong Kong's Hang Seng down 0.8% and Japan's Nikkei 225 up 0.1%.

Write to Jessica Menton at Jessica.Menton@wsj.com

  (END) Dow Jones Newswires
  08-22-19 1409ET
  Copyright (c) 2019 Dow Jones & Company, Inc.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.