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Dow Jones Industrial Average has declined by 282.32 points on Friday after a terrible PMI reading and the impact of the health crisis in Asia. The uncertainty surrounding the US presidential election is also contributing to the fall on the Dow Jones. NASDAQ also declined by over 2% on Friday. The 30-year Treasury note yields declined to an all-time low of 1.892%.

Underestimates the impact of coronavirus

The stock market bulls have underestimated the impact of coronavirus on the US economy. It is also unlikely that trade truce with China proposed by Donald Trump would be fulfilled. China can also say no to the trade deal and heighten the risk for another trade war. Both nations will need to renegotiate the trade deal in the event of force majeure because of coronavirus. The stock market in the US has more to worry about when compared to the impact of coronavirus on the economy.

Terrible PMI shows an imminent recession

An awful PMI, which is the weakest since 2013, is an indication of an imminent recession in the US. It shows the first contraction in US business activity. A chief business economist at HIS Markit, Chris Williamson, said the worst PMI is because of the impact of the coronavirus in China and the forthcoming presidential election in the US in November this year.

The corona outbreak has weakened the demand for sectors like supply chains, exports, tourism, and travel. Also, businesses with a cautious approach are restricting spending because of uncertainty about the upcoming US presidential election and worries of a wider economic slowdown. The awful PMI reading is alarming the Dow bulls because it shows a recession is in the offing for the US economy.

The manufacturing facilities in the US have reported a drop in production in H2 2019. It is an indication that the nation will face an imminent recession. However, fundamentals in the US are strong.

Some economists are optimistic

Some economists are optimistic. They do not believe the HIS Markit PMI’s message that the US economy will face an imminent recession. The consumer confidence and job creation have not declined suddenly in recent months to believe that the US economy is sinking.