S&P 500 falls as the US PMI recovers. Treasuries rise. Against projections for a more modest recovery to 47.5 Services, the Flash U.S. Composite increased to 50.2 from 46.8.
Also moving out of the contraction zone is the PMI. Which increased from 46.8 to 50.5. Industrial output is still sluggish, although it has increased somewhat from January’s 46.9 to 47.8.
S&P 500 slumps on recovery statistics
The gradual recovery of U.S. business activity and its exit from recession in February are signs that the economy is strengthening despite the sharp rise in interest rates intended to curb inflation.
Preliminary results from S&P Global indicate that the U.S. Flash Composite PMI rebounded for the second straight month, rising to 50.2 from 46.8 previously.
For context, numbers above 50 signify growth, whereas those below that threshold suggest a decline in output.
In terms of the latest survey constituent parts, the manufacturing PMI remained sluggish but managed to marginally increase from 46.9 to 47.8.
In terms of the latest survey constituent parts, the manufacturing PMI remained sluggish but managed to marginally increase from 46.9 to 47.8.
The services PMI, which has been at its top level in 8 months, improved to 50.5 from 468 in the meantime, supporting the idea that the economy may avert a recession.
S&P 500 and other stocks’ reaction
US stocks started to decline more quickly after the PMI data was announced, and the 2-year note’s yield shot up to 4.7 percent of the total as a result of a surge in U.S. Treasury yields across the curve.
But the likelihood of a harsh landing has decreased due to the U.S. economy’s endurance.
It has also raised the possibility that now the Fed will need to compress monetary policy even further in order to curb inflationary pressures and bring back price stability. Over the medium run, this might have a big negative impact on stocks.
Graph of S&P 500 and Treasury Yields
Source: TradingView
Earnings weigh on stock markets
The leading retailer in the United States, Walmart Inc. (NYSE: WMT), predicted full-year results that fell short of expectations. Customers may put pressure on its margins because they are looking for deals.
Walmart stock had regained some of its earlier losses and was trading 0.6% higher.
The home improvement retailer Home Depot, Inc. (NYSE: HD) also announced a profit prediction that was lower than anticipated due to increasing supply chain expenses and sluggish demand. Home Depot’s stock dropped by more than 5%.
Retail earnings were expected to provide markets some comfort that the Federal Reserve’s interest rate increase program was about to come to a halt. In particular, tech businesses have benefited this year as a result of this hope.
Upcoming Important Events
The Federal Reserve will disclose the meeting minutes from earlier this month on Wednesday, giving investors the opportunity to analyze the comments made by Fed officials to determine their future plans for interest rate policy.
Another measurement of the 4th quarter’s gross domestic product, as well as personal income, spending, and the Fed’s favored inflation indicator. The core personal consumption expenditure index is coming out this week.
