Stocks turn positive; oil prices fall further

August 19 02:59 2015

U.S. stocks rebounded from a weak start to the session following a weak reading on manufacturing in the New York area, turning positive in morning trading amid the latest sign of upbeat sentiment in housing. The Dow Jones industrial average was up about 70 points, or 0.4%, to 17,526 in afternoon trading after initially dropping more than 100 points at the open. The Standard & Poor’s 500 index, which finished 0.7% higher last week despite an early week decline due to fears related to China’s economy and currency, was up 0.5%. The Nasdaq composite index gained 0.7%.GTY 461057128 A FIN USA NY

U.S. benchmark crude was down 0.3% to $42.38 a barrel after earlier falling below $42 a barrel and that weighed down names like Chevron, which was down almost 2% in afternoon trading. Wall Street’s initial reaction to the weakest reading on New York-area manufacturing since 2009 was negative, as investors worried that the weaker-than-expected August result could be hinting at coming trouble in the nation’s factories.

“The massive collapse in the Empire State manufacturing index to -14.9 in August, from +3.9 in July, suggests that the factory sector is in a lot more trouble than previously thought,” noted Paul Ashworth, chief U.S. economist at Capital Economics. “A drop as big as this does suggest that the dollar’s appreciation and the slowdown in global economic growth is having a more marked impact on the manufacturing sector than previously thought.” Still Ashworth noted that regional manufacturing surveys are “notoriously volatile,” and that investors should not “read too much into the collapse” until it is verified by a corresponding decline in either the Philly Fed index (due out on Thursday) or the Markit manufacturing PMI (due out on Friday).”

The weak manufacturing reading could make it more difficult for the Fed to hike rates next month, although Ashworth is still betting on a September lift-off. Financial markets this week are turning their attention away from global concerns that dominated the focus last week as stocks turned volatile after China took steps to devalue its currency to help boost exports and economic growth. China’s actions sparked concerns about the strength of China’s economy and fears of a currency war.