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Manufacturing Data Improves, Bond Yields Stay Elevated

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Market indices were mixed for today’s session — the first of the week, month and Q4. Most of the majors were trading in the red, aside from the tech-heavy Nasdaq, which only dipped temporarily below opening levels. The small-cap Russell 2000 sank the quickest and stayed down furthest today, though all indices are off their intraday lows at the closing bell. The Dow was -0.22% on the day, the S&P 500 was +0.34%, the Nasdaq +0.67% and the Russell was -1.58% — now trading right around year-to-date levels.

During the course of the day, we got some slightly better September Manufacturing numbers than expected from the final S&P PMI and ISM. The S&P print jumped to 49.8 from a downwardly revised 47.9 the previous month. We’re still below the crucial 50-mark which indicates growth in this metric, but we’re about as close as you can possibly get. For ISM, 49.0 was bigger than 48.0 expected, and a nice pop from the unrevised 42,6 reported a month ago.

Construction Spending for August today took a tick down from expectations — +0.5% versus +0.6% expected, though the upward revision from +0.7% to +0.9%, for a 10 basis-point (bps) gain over the past two months. These figures — like the Manufacturing numbers before it — spell a modestly well-adjusted economy overall, though strength in these metrics do not show a sufficiently muted economy that would be assisted by a ratcheting down of interest rates by the Fed over time.

One area taking very seriously the “higher rates for longer” maxim from the Fed are bond yields, especially on the 10-year, which are currently resting at near 16-year highs: 4.685%. The intra-day high of 4.71% was the highest level since October of 2007. The 2-year yield got to 5.12% today, so while we do see the long-inverted yield curve narrowing, it’s doing so at historically very high levels.

We’re still about a week and a half away from the beginning of unofficial Q3 earnings season, but there are a few companies putting out quarterly numbers this week, particularly in the food, drink and agriculture spaces. Cal-Maine Foods (CALM - Free Report) , McCormick (MCK - Free Report) , Lamb Weston (LW - Free Report) , Conagra (CAG - Free Report) and Constellation Brands (STZ - Free Report) are a good portion of those companies putting out earnings for the week. We don’t expect a ton of market impact from any of these companies, with the possible exception of a big expected move in many of them one way or another.

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