Manufacturing PMI Slips Into Contraction Territory

Key Insights

• Manufacturing PMI decreased from 50 in October to 49.4 in November. 
• Services PMI increased from 50.6 to 50.8.
• Composite PMI remained unchanged at 50.7.

On November 24, S&P Global released the flash readings of U.S. PMI reports for November. The reports indicated that Manufacturing PMI declined from 50 October to 49.4 in November, compared to analyst consensus of 49.8. Numbers below 50 show contraction.

Services PMI improved from 50.6 in October to 50.8 in November. Composite PMI remained unchanged to 50.7 due to the better-than-expected performance of the services sector.

S&P Global commented: “The U.S. private sector remained in expansionary territory in November, as firms signalled another marginal rise in business activity […] Business uncertainty was also heightened among U.S. firms, as expectations regarding the year-ahead outlook slipped to the weakest since July.”

Treasury yields continued to move higher after the release of PMI data. The yield of 10-year Treasuries settled above 4.45%, while the yield of 30-year Treasuries climbed towards the 4.60% level.

U.S. Dollar Index remained under pressure after the release of the reports. Traders ignore rising Treasury yields and focus on the upcoming shift in Fed policy. Markets remain convinced that Fed will start cutting rates in the first half of the next year.

Gold continued its attempts to settle above the psychologically important $2000 level. A more dovish Fed is bullish for gold that pays no interest.

SP500 settled near the 4555 level as traders reacted to PMI data. It looks that SP500 needs additional catalysts to test new highs.

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