Market Review January 24, 2024

On January 24, 2024, a slew of pivotal economic indicators were released, providing a comprehensive snapshot of the U.S. economic landscape. Among these, the S&P Global US Manufacturing PMI showed a marked improvement to 50.3 from a forecast and previous figure of 47.9, indicating a return to expansion in the manufacturing sector. The S&P Global Composite PMI, encompassing both manufacturing and services, also surpassed expectations, posting a 52.3 figure against a forecast of 50.9, suggesting broad economic growth. The Services PMI continued this trend, reaching 52.9 versus a forecast of 51.0, underscoring the resilience of the services sector. Additionally, Crude Oil Inventories experienced a significant drawdown of -9.233 million barrels, vastly exceeding the forecasted -2.150 million barrels, signaling stronger demand or lower supply. The Cushing Crude Oil Inventories also saw a reduction. In the debt market, the 5-Year Note Auction yield rose to 4.055% from the previous 3.801%, indicating changing dynamics in U.S. Treasury demand.

Impact on USD

The mixed economic indicators provided nuanced directions for the USD. The improved PMIs indicate economic resilience, which traditionally would support the USD. However, the increase in the 5-Year Note Auction yield suggests a potential dip in demand for U.S. debt, which could undermine the dollar. Overall, the impact on the USD might lean towards mixed to bullish, given the positive signals from the broader economy.

Impact on Gold

The gold market's response to these indicators would likely be influenced by the inflationary pressures signaled by the crude oil inventories' drawdown and the upward shift in treasury yields. Typically, gold would benefit from such inflationary trends as a hedge against the diminishing value of fiat currencies. However, the economic optimism reflected in the PMI data could temper gold's gains, leading to a mixed outlook.

Impact on Equity Futures

Equity futures might respond positively to the robust PMI data, indicating growth and expansion across significant sectors of the economy. However, rising treasury yields could temper this optimism by increasing borrowing costs and potentially slowing down economic activity in the longer term. The energy sector, in particular, might see volatility due to the fluctuations in crude oil inventories.

The economic data from January 24, 2024, presents a complex picture of the U.S. economy, with indicators of growth and expansion on the one hand and signals of potential inflationary pressures and fiscal concerns on the other. Investors and policymakers would need to navigate these mixed signals carefully, balancing the optimism from the PMI data with the caution advised by the oil inventory drawdowns and treasury yield increases.