The ISM manufacturing report showed a slight increase in US stocks, although it is still in contraction territory. However, prices paid were hotter, which indicates rising costs. Because material costs are expected to rise and the Fed has yet not to see a real slowdown in demand for their products, the argument for increasing rates is strong. After looking at the February labor markets report and possibly downward January revisions, March Mayhem could experience tremendous volatility. The February inflation report is also expected to show modest decline, but any hot pricing data could keep the bond market selloff going.
There is a lot of information in the February ISM Manufacturing report. The PMI reading, which was the key indicator of PMI, ended a five-year streak of declines and increased from 47.4 a 47.7. This is below the consensus estimate of 48.0. The price paid rose from 44.5 – 51.3. This is higher than the 46.5 forecast because demand has clearly rebounded. Prices paid were at their highest level since September, for the first time ever.
When you consider that China’s activity impressed that should provide some support for the US readings over the next few reports. While new orders rose from 42.5 – 47, production fell from 47.3 – 48.0. Employment fell into…