Investors have priced in robust economic news, but a bullish unemployment report on Friday could blow them out of the water if there is progress not only in the headline rate but in the broader rate that includes labor participation.
Two measures of manufacturing activity were released on Monday, sending mixed messages. The ISM Manufacturing PMI fell short of expectations at 60.7 instead of a forecast 65.0, compared to 64.7 in March, while the IHS Markit Manufacturing PMI nearly matched forecasts at 60.5, about the same as in March.
The news sent the 10-year yield plunging to 1.58% from 1.63% in early trading, but the notes recovered to about the 1.60% level. This is still a loss of 3 basis points on the day but the quick bounce-back shows investor resistance at that level.
Supply chain bottlenecks are clearly hindering manufacturing activity, but anything over 50 in the manufacturing indexes indicates expansion. Stocks powered ahead on anticipation of reopening the economy.
The murky manufacturing data sharpened the focus on the upcoming jobs report, which analysts consider to be a more accurate indication of where the economy is headed. There is no question that manufacturing demand is surging, but disruptions and shortages are dampening activity.
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