The S&P/ASX 200 Index (ASX: XJO) is having a day to forget on Thursday.
As we head into the lunch hour, the benchmark index is down 1.15% at 7,173.8 points.
With every sector in the red today, why are ASX 200 investors hitting the sell button?
What's pressuring the ASX 200 today?
The Aussie share market looks to be catching some unwanted headwinds from the United States.
The ASX 200 often takes its lead from US share markets.
And yesterday, overnight Aussie time, saw all the major US indexes finish deep in the red.
Tech stocks fared the worst, with the Nasdaq Composite Index finishing the day down 1.1%. The S&P 500 Index closed down 0.7%.
So, what's happening in the US that's causing ASX 200 investors angst?
Well, it appears to be a case of good news is bad news. Meaning good news for the US economy is bad news for the outlook of more interest rate hikes from the Federal Reserve.
Yesterday saw the release of the August data from the Institute for Supply Management's US services index. The index gained just under two points to reach 54.5, representing a six-month high. That was far higher than consensus expectations, with any figure more than 50 signalling expansion.
This saw US Treasury yields climb and led to upward revisions on how long investors will have to wait before the Fed starts cutting interest rates. Consensus estimates of a Fed rate hike in November also increased sharply.
Higher rates for longer in the US would likely drag on US stocks, and the ASX 200 will feel those spillover effects.
What are the experts saying?
Commenting on the latest ISM data that looks to be dragging the ASX 200 lower today, Quincy Krosby, chief global strategist at LPL Financial, said (courtesy of Bloomberg):
The ISM Services Sector report underscores the resilience of the largest portion of the economy.
Unfortunately, the prices-paid component moved in the wrong direction – similar to the higher prices paid in the manufacturing report – edging markedly higher. This is certainly not good news for a data-dependent Fed.
Jeffrey Roach, chief economist at LPL Financial, said, "Given the data, the Fed will most likely deliver a hawkish pause at the next meeting."
But Roach noted that there's no certainty yet of what's ahead:
The hard data is not yet convincing enough to establish strong views about the subsequent meetings. Investors should still find opportunities in the market but it could be a bumpy ride.
Indeed, just as in US markets, savvy ASX 200 investors will still be able to find exciting opportunities, even in bumpy market conditions.
