September is already taking its toll on the U.S. stock markets.
In the past, manufacturing was the staple of American society and drove the country’s growth. Today, this couldn’t be further from the truth. Trade deals and other governmental regulations have helped push manufacturing out of the country to foreign locations. It comes as no surprise that the U.S. experienced a downturn in manufacturing during the past month. In July, the Institute of Supply Management topped manufacturing activity at 52.6.
Analysts expected the number to fall marginally to just 52. Unfortunately, they were terribly wrong. The number dropped more dramatically than anyone could have expected. For August, the number fell to 49.4. This took a major toll on American markets.
It is also believed that anything below 50 signals contraction in factory activity. Suffice to say, the news is not good for investors or the American economy.
Another major market mover for the first day of September was falling oil prices. Investors have become concerned about the current supply of crude within the U.S.
During the day’s trading, crude oil has sunk as low as $43, and the bottom seems nowhere in sight. Some companies, including the cheapest moving service providers, will benefit from the downturn in oil prices, but most will be negatively impacted. An upcoming meeting of OPEC members could well reverse the course of oil prices, but that remains to be seen and the meeting is simply too far away for investors, who live in the now.
Another major development for Sept. 1 involves the controversial merger of Elon Musk’s Tesla (TSLA, Financial) and SolarCity (SCTY, Financial). Musk seems intent on merging the companies despite a lot of criticism from investors and regulators.
On Thursday, Telsa confirmed it was required to pay over $400 million to bondholders during the third quarter, and it will begin raising more money before the end of the year. The purpose of the additional capital should be obvious. The company needs the money to fulfill Musk’s dreams of combining the electric car company with the home solar company.
The recent filing also sheds light on SolarCity’s current troubles. According to the filing, 15 institutional investors were given the opportunity to acquire SolarCity while some were prompted for money.
Fifteen of these investors passed on these opportunities. Nonetheless, Musk’s vision, which dates back to 2006, remains intact. Musk still plans on merging the two companies even if it means shortchanging SolarCity’s current shareholders.
Meanwhile, influential government figures within the U.S. intend to make a few big changes in September, and they don’t seem to mind hurting the public or companies along the way. The eradication of private prisons and the targeting of drug companies could prove to be detrimental to the U.S., its citizens and the economy.
Despite some prisoners praising private prisons, President Barack Obama and presidential nominee Hillary Clinton continue to rile up their base with justice reform rhetoric. Just don’t expect their shenanigans to last much longer.
Disclosure: I do not own any shares or any stocks mentioned in this article.
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