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Here's Why the ISM Non-Manufacturing Data Moved Stocks

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U.S. stocks continue to get pummeled. 

Here's a break down of what's driving the market down. Before we break it down, here are the price movements:

Though markets have since shifted positive, the Dow Jones Industrial Average initially plummeted following weaker than expected September ISM non-manufacturing data.  Here's what's driving the market:

The ISM non-manufacturing index read 52.6 for the month of September, badly missing economists estimates of 55, and decelerating when compared to August's result of 53.1. The services sector is still growing, as any result above 50 represent year-over-year growth, but the clear miss of estimates was enough to shake the market. Services are incredibly important as roughly two-thirds of all U.S. output is in the form of services. Bullish Ryan Detrick, senior market strategist for LPL Financial barely flinched at the manufacturing contraction seen Wednesday, but did say that "This [manufacturing contraction] makes the services number and jobs data out the next two days all the more important." TheStreet's Jim Cramer wrote on TheStreet's premium sister site RealMoney that the services sector is what investors need to eye in particular. 

Tuesday, the ISM manufacturing index showed a contraction for September, with the reading coming in at 47.8 and missing expectations of 50.1. Wednesday, ADP reported the the U.S. added 135,000 jobs, missing economists expectations of 142,000. 

As for the manufacturing data, some on Wall Street have said that slower investment and slower hiring could hurt the currently "strong" consumer. But at present, most are not overly concerned about the consumer. 

More broadly, stocks could still fall from current levels. "We're going to end up lower than we are now" for 2019, Tony Bedikian, head of global markets at Citizens Bank told TheStreet. "We'll see a few percentage points lower than we are right now." The S&P 500 is up just a touch more than 14% year-to-date. Just weeks ago, the index's 2019 gain was 21%. But Bedikian remains concerned about the ongoing trade war between the U.S. and China, which has played a role in the poor performance of the manufacturing sector and certainly has not helped the consumer.  Bedikian noted, which many on Wall Street agree with, that the strong likelihood of one more Federal Reserve interest rate cut for 2019 would be "supportive" of equities, as lower rates will be outweighed by the negative impact of a potentially worsening trade war. 

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