Yesterday saw a significant spike in bond yield, especially for the 10-year Treasury bond that is putting pressure on long-duration stocks, especially the technology counters in Nasdaq. Upon opening, this sent significant indices into a downward spiral and sank deeper into the red.
It does not help that Fed official, Kashkari, is open to a rate hike of 50 basis points. Such a hawkish statement pounded on equities valuation and deepened stocks into the tomato territory. There are increased odds of a hard landing as the US economy faces a more robust risk of overtightening.
📊Manufacturing data sounding alarm on the inflation fight🧸
The manufacturing industry is still a vital motivator of the US economy. The latest PMI of 47.7 indicates that it is shrinking. However, it is still an improvement from 47.4 in January. Nevertheless, this marked the fourth continuous month of decline in the sector.
New orders registered at 47, a jump from 42.5 which could indicate some future growth.
Then came the PMI pricing index, which hit 51.3. This comes after four consecutive months of dropping, and now its rises put risk back on the fight against inflation.
To sum up, with an expected moderating in economic activity and yet with a jump in inflation, the US is running hot on stagflation risk.
📮What are our dishes today? 🗽
At 9.30 pm, we will have the Initial Jobless Claims, which is likely to hit 195K, a moderate increase from 192K in the prior period. This is important as the Fed aims to see a softening in labour conditions.
Concurrently, we will also have the Unit Labor Costs, and it is likely to register growth still but lower at 1.6% from 2.0% in the previous period. We want to see the labour cost decrease so that it does not feed too much on wage-induced inflation.
It is 2 March, Thursday, at 8.45 am in Singapore and 7.45 pm in New York. The pressure is mounting on stock valuation, and today’s labour market data will be pivotal for major indices to remain on an uptrend trajectory.
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All is well.