Good Evening, Investor:
Tuesday, September 1, 2015
Stocks posted sharp losses, after a renewed wave of bad news on China's economy. The markets reacted to new data revealing a disappointing August for the Chinese manufacturing and services sectors. Stateside, a read of the U.S. manufacturing sector also disappointed, while a construction spending update showed a seven-year record high.
The Dow dropped 469 points, with all of its 30 components retreating; the S&P 500 Index lost 58 points; and the Nasdaq declined by 140 points. Decliners led advancers by six to one on the NYSE and by four to one on the Nasdaq. The price of the 30-year Treasury weakened, while the price of the 10-year Treasury strengthened. Gold futures rose $7.30 to close at $1,139.80 an ounce. The price of crude oil fell $3.79, or 7.7%, settling at $45.41 a barrel.
In other business news
- The Beijing government's gauge of China's manufacturing sector fell to a three-year low in August, while a private gauge fared no better. The Chinese manufacturing purchasing managers' index dropped to 49.7 in August from July's 50 reading. Any result below 50 indicates contraction. Meanwhile, a separate manufacturing PMI from Markit and Caixin Media fell to 47.3 in August from 47.8 in July.
- The Chinese services sector also showed weakness in August. The Beijing government's nonmanufacturing PMI declined to 53.4 last month from July's 53.9 reading, indicating a slower rate of expansion. Markit and Caixin's services-sector reading also revealed a slowdown, falling to a 13-month low: 51.5 in August, down from July's 53.8 reading.
- The U.S. manufacturing sector grew at its slowest pace in two years, weighed by low demand and weak exports. The Institute for Supply Management's manufacturing PMI fell to 51.1 in August from 52.7 in July. Any reading above 50 indicates expansion. The PMI's new orders index fell last month to 51.7 from 56.5 in July, while its exports index dropped to 46.5 from 48.
- U.S. construction spending in August rose 0.7% to a seasonally adjusted annual pace of $1.08 trillion, the highest level in more than seven years, according to the Commerce Department. Of note, single-family home construction increased 2.1% and factory construction rose 4.7%. From one year earlier, total construction spending has advanced 13.7%.
- Automakers posted mixed August sales, as a later-than-usual Labor Day holidaytypically a revenue boosterwas not part of last month's results. General Motors' sales fell 0.7%. Ford and Fiat-Chrysler posted 5.4% and 1.7% gains, respectively. Toyota and Honda posted 8.8% and 7% declines, respectively. Kia posted its best-ever August sales, with a 7.7% increase.
You may be familiar with AirBnB, the travel website that allows people to list, find, and rent lodging that isn't a traditional hotel, from a beachside bungalow to a countryside castle. With more than 1 million listings, the disruptive business has drawn consumers who don't like overpaying hotel chains for boxy rooms that lack the comforts of home. So what's next for AirBnB? According to CNN, the $25 million company has been quietly gobbling up another customer base: the $300-billion-a-year business travel market.
Last year, AirBnB launched a unit dedicated to business travel that, according to the company, has grown 700% in its brief existence, with 1,000 companies signing on. AirBnB's business travel division connects companies with apartments that offer money-saving amenities like free parking, free WiFi, and refrigerators that don't charge you $10 if you take a $1 bottle of water. Many hotels charge extra for these amenities, especially in major metropolitan business hubs. So for corporate managers who need to approve and justify their employees' travel costs, AirBnB's savings are appealing.
CNN quoted a technology executive who summed up AirBnB's benefits as follows: "Around trade shows, hotels jack up the prices. So it's a lot more convenient to get an apartment, and if you're going with two or three other people you can stay at the same place, get more done, and save money."
To that, I say: Indeed. Having booked rooms for conferences and trade shows in previous jobs, I know all too well the wave of remorse that comes from reserving a room too late and seeing the price skyrocket. "Oh, you'll be in town for the Innovation Insights Summit? We're all booked up, except for the dirty old ice machine closet on the 80th floor. I have that space listed for $600 a night. Oh wait, that just went up to $900 a night. And you'll have to share the space with a rat."
According to USA Today, major hotel chains aren't ceding the business traveler market without a fight. Hotel executives are growing and modernizing their more comfortable, kitchen-equipped extended-stay offerings to lure back corporate clients whose employees prefer the comforts of home. This includes Starwood, which aims to triple its sleek, environmentally friendly extended-stay properties by 2018.
At this rate, I'm guessing we'll reach a point where lodging businesses pour all of their capital investments and advertising dollars into competing over whose rentals feel the most like home. I can see the ads now …
- "Our sofas have the most pet hair per square inch!"
- "Our kitchens have those cutesy wooden signs that say things like 'Cook with love. Guzzle wine lovingly. Use affectionate oven mitts!'"
- "Our desks feature random to-do lists, junk, and dishesjust like yours do!"
Greeeeat. Soon enough, business travelers will change their minds and opt again for spartan, steeply priced rooms that comprise one bed, one bathroom, and one burn-covered ironing board. And then a new breed of disruptive travel start-ups will emerge. They will be called … hotels!
John D. Natale
The opinions stated are those of the author and are not intended to be used as investment advice. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any mutual fund.
16,058.35, -469.68 or -2.84%
4,636.10, -140.40 or -2.94%
1,913.85, -58.33 or -2.96%
S&P MidCap 400
1,376.69, -40.06 or -2.83%
1,128.05, -31.40 or -2.71%
10-Yr Treasury Notes
45.41, -3.79 or -7.70%
1,139.80, +7.30 or +0.64%