Market Review: October 01, 2024

The economic data released on Tuesday, October 1, 2024, provided mixed signals regarding the state of the U.S. economy. Key indicators, including the S&P Global US Manufacturing PMI, ISM Manufacturing data, and JOLTs Job Openings, highlighted challenges in the manufacturing sector, while employment data suggested strong labor demand. The day's figures offered insights into economic growth, inflation pressures, and labor market conditions, which are crucial for assessing monetary policy outlook and market sentiment.

Today's Event Overview:

• S&P Global US Manufacturing PMI (Sep): The PMI came in at 47.3, below the forecast of 47 and previous reading of 47.9, indicating contraction in the manufacturing sector and reduced business activity.
• Construction Spending (MoM) (Aug): Construction spending decreased by 0.10%, missing the forecast of 0.20% but showing a less severe decline compared to the previous -0.50%.
• ISM Manufacturing Employment (Sep): The index fell to 43.9, below the forecast of 47 and previous 46, indicating a further decline in manufacturing employment.
• ISM Manufacturing PMI (Sep): This key indicator was at 47.2, below the forecast of 47.6 and unchanged from the previous value, indicating persistent contraction in manufacturing activity.
• ISM Manufacturing Prices (Sep): Prices fell to 48.3, well below the forecast of 53.5 and previous 54, suggesting lower input costs and reduced inflationary pressures in the manufacturing sector.
• JOLTs Job Openings (Aug): Job openings rose to 8.040M, exceeding the forecast of 7.640M and the previous 7.711M, reflecting strong demand in the labor market.
• Atlanta Fed GDPNow (Q3): The GDP estimate was revised down to 2.50%, below the previous forecast of 3.10%, signaling potential slower economic growth.
• API Weekly Crude Oil Stock: Stocks fell by 1.458M barrels, compared to the forecasted draw of 2.100M and a previous decline of 4.339M, indicating a smaller-than-expected drawdown in oil inventories.

Impact Analysis:

• Impact on USD:

The weaker-than-expected manufacturing PMI and ISM data reflect continued challenges in the manufacturing sector, which may weigh on the USD due to concerns about slower economic growth. However, the strong job openings data from the JOLTs report supports the labor market, providing some resilience for the USD. The mixed data overall leads to a somewhat cautious outlook for the dollar, with a slight negative tilt due to the manufacturing sector's struggles.

• Impact on Gold:

Gold may find support from the weaker manufacturing data and downward revision in GDP estimates, as these increase economic uncertainty, boosting demand for safe-haven assets. Additionally, lower manufacturing prices could signal reduced inflationary pressures, potentially limiting aggressive monetary tightening, which can be positive for gold. Overall, the environment could be seen as moderately bullish for gold.

• Impact on Equity Futures:

Equity futures might react negatively to the contraction in manufacturing activity and lower construction spending, as these suggest weaker corporate earnings prospects in the industrial and construction sectors. However, the robust JOLTs data provides a counterbalance, suggesting strength in the broader labor market, which could support consumer spending and overall economic resilience. The net effect on equity markets is likely mixed, with investors weighing growth concerns against labor market strength.

The combination of contraction in manufacturing and robust job openings highlights a divergence between different parts of the economy. This mixed picture complicates the outlook for monetary policy, as the Federal Reserve may need to balance concerns over economic slowdown with signs of labor market strength. Additionally, the lower-than-expected draw in crude oil stocks could put downward pressure on oil prices, impacting inflation dynamics