ETFs To Suffer As March's ISM Manufacturing Index Disappoints

The impact of the coronavirus pandemic can be seen in the manufacturing sector that makes around 11% of the U.S. economy. Accordingly, the latest report on U.S. manufacturing, released by the Institute for Supply Management (ISM), failed to cheer investors. The ISM’s national factory activity index came in at 49.1 in March comparing unfavorably with 50.1 in February. It, however, came in better than analysts’ expectations of the reading of 45.0, per a Reuters’ poll. Notably, readings below 50% indicate contraction.

The new orders sub-index declined to 42.2 (the lowest since March 2009) from 49.8 in February. Moreover, there was a decline from 46.9 to 43.8 in the measure of factory employment. Manufacturers also informed about paying less for raw materials and other inputs. Timothy Fiore, chair of the Institute for Supply Management, said that “the coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sectors”.

The Dow Jones Industrial Average witnessed its worst quarterly performance since 1987, largely due to the coronavirus-led sell-offs. The blue-chip index lost more than 23% of its value in first-quarter 2020, as the pandemic tightened its grip on countries outside mainland China. Seeing the biggest quarterly loss since 2008, the S&P 500 also depreciated 20% in the worst first quarter, followed by a 14% decline of the Nasdaq Composite.

Coronavirus & the U.S. Economy

The United States has recorded more than 216,500 cases, with a death toll of more than 5,100. The top U.S. government scientists have estimated that even if the current social-distancing guidelines are maintained, the country will likely see around 100,000-240,000 deaths due to the coronavirus pandemic. To combat this, President Trump extended the federal government’s guidelines for social distancing until Apr 30. The outbreak has disrupted global supply chains and economic activities. Manufacturers are struggling with distorted supply chains and logistics, especially those belonging to industries like computers and electronics, fabricated metal and chemical.

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