A New Month.
Robert R. Fragnito
Chief Operating Officer | Financial Advisor | Portfolio Manager at MCF Capital Management, LLC
US stocks finished mixed on Wednesday as manufacturing data indicates slowdown with inflationary price pressures driving Fed and stagflation concerns.??
We begin a new month after a pretty dismal February, many speculate that March will be a make or break month for 2023. Investors are grappling with more economic data, today’s manufacturing prints reflected contraction according to surveys by S&P Global and the Institute of Supply Management (ISM).??
While manufacturing was weak as reflected in the ISM Manufacturing PMI, the market feared potential stagflationary signals in reaction to the prices paid component of the report, which came in at 51.3 versus 45.1 expected.
Treasury yields moved higher in reaction to the prices paid component of the ISM. The 10YR Treasury was over 4% for the first time since November. In addition, the Fed-sensitive 2YR moved to its highest level since 2007 at around 4.9% but eventually pulled back. Fed fund futures traders are pricing in the probability that the Fed’s benchmark rate will rise to 5.5%-5.75% by September, implying more hikes for the year. ?
Meanwhile, we got some Fed speak from President Neel Kashkari of the Minneapolis Fed and Atlanta Fed President Raphael Bostic. Kashkari is unsure whether he wants a 25 bps hike or a 50 bps hike at the next Fed meeting, and Bostic says the target rate needs to be between 5%-5.25%.
On the international front, Asian shares soared on news of China’s factory activity growing at the fastest pace in over a decade. While the data out of China is boosting sentiment, some fear that China’s reopening will add to global inflation.
Despite the slight uptick, manufacturing is still weak, and investors log another data point showing a mixed picture for the US economy. In our view, the manufacturing data does not offer an indication of stagflation when we take seasonal factors into consideration. Furthermore, while commodity prices increased today on the China data, we are not convinced it will add to global inflation.
To conclude, investors continue weighing economic data against monetary policy.?
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THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?
?? SOURCES: MarketWatch, Investing.com, Reuters, CNBC, WSJ, Financial Juice
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