March U.S. ISM Manufacturing
The second quarter began with the U.S. ISM manufacturing release for the month of March (Figure 1). Consensus estimates called for an increase to 54.0 from February’s 53.2. The reading was reported below estimates at 53.7; however, the lower reading does little to alter the current FOMC tapering process.
This Friday’s March unemployment report is all that stands in the way of another reduction of $5 billion in Treasury purchases and $5 billion in mortgage-backed security purchases at the upcoming April 29-30 FOMC meeting.
Expectations for this Friday’s report are for an increase in the headline figure from last month’s +175,000 to +225,000. Private payrolls are also expected to rise from last month’s +162,000 to +210,000. The unemployment rate may fall from 6.7% to 6.6%. I place single-digit odds on the possibility that the FOMC does not taper at its upcoming meeting.
The response from the capital markets was for the S&P 500® Index (SPX) to record another new all-time high of 1884.60 (Figure 2). The U.S. 10-Year Treasury yield has not responded much at all and is currently trading at 2.75% (Figure 3).
Figure 1: March 2014 U.S. ISM Manufacturing Index
Figure 2: S&P 500 Index (SPX) Prior 365 Days
Figure 3: U.S. 10-Year Treasury Yield Prior 365 Days