Amanda Cooper forecasts U.S. and global markets. Monday's March Institute for Supply Management report gave the industrial sector some good news.
Last month, manufacturing activity returned quickly as new orders rose for the first time in 1-1/2 years despite high interest rates and inflation. High layoffs and rising gasoline and food prices are causing input price increases.
Treasury yields rose to their highest level since mid-February as the data caused the greatest sell-off in weeks. Futures markets imply a 65% possibility of a June cut, up from 50/50 yesterday. Significantly, the market now pricing in less than 70 basis points, or three quarter-points, in cuts by December, down from last week's comfortable three.
On Friday, Federal Reserve Chair Jerome Powell said so after the monthly core personal consumer expenditures index.
The economy is healthy, so "that means we don't need to be in a hurry to cut", he said. The dollar is solid and trading around its highest level since mid-November against a basket of major currencies. Wall Street stock index futures indicate a stable start, but European major indices are positive.
This week, the market is waiting for Friday's non-farm payrolls report, which is predicted to show 200,000 March job gains. Wage growth will matter more to the Fed and its policymakers. Average earnings are predicted to grow 4.1% in March, down from 4.3% in February.
The Job Openings and Labor Turnover Survey (JOLTS) may indicate labor market tightness later. In February, job opportunities declined to 8.863 million, although this was considered a sign of a softening labor market.
Since March 2022 job vacancies reached a record 12.182 million, COVID-19-related job market pressure has subsided. U.S. markets should be guided by these developments later Tuesday.
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