EDITOR'S NOTE

The first day of October did not disappoint those who pointed out that it's historically one of the most volatile months.

Stocks were negative after the manufacturing sector logged the worst reading in a decade, as measured by the U.S. manufacturing purchasing managers’ index from the Institute for Supply Management.

There was plenty of negative sentiment to go around.

“There is no end in sight to this slowdown," wrote Torsten Slok, chief economist at Deutsche Bank. "The recession risk is real.”

"The lights haven't gone out on the economic outlook yet, but they are certainly growing very dim," wrote Chris Rupkey, chief financial economist at MUFG.

Many observers blame President Donald Trump's trade war for the slump in manufacturing. The president blames the Federal Reserve and its chairman, Jerome Powell, for keeping interest rates too high. "They are their own worst enemies," Trump tweeted Tuesday, "They don’t have a clue. Pathetic!"

Odds of a Fed rate cut rose on the manufacturing news with the fed funds futures market pointing to a 63% chance of a quarter-point rate cut at the central bank's October meeting. Unfortunately, another rate reduction may not do much good for stocks.  The market, after all, has fallen since the Fed's last rate cut, indicating that as rates get closer to zero they have less potency as a stimulus.

"There was a time in history when a decline in the fed funds rate did propel the equity market higher," writes UBS strategist Francois Trahan. "We would expect further rate cuts to be consistent with a struggling equity market."

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