April 2024

A look at the day ahead in U.S. and global markets by Amanda Cooper.

Today marks the start of a new week, a new month, a new quarter and a new set of data to get investors going. Friday’s personal consumption expenditures price (PCE) index landed when most markets were closed, making this the first real chance to digest the numbers.

The PCE index rose at an annual rate of 2.5% in February, up from 2.4% the month before. The number excluding volatile food and energy prices – the Federal Reserve’s preferred measure – rose 0.3% on a month-to-month basis, slightly faster than Chair Jerome Powell had anticipated when he said last week that core inflation would be “well below” 0.3% in February.

However, following the numbers on Friday, Powell said the latest data was “along the lines of what we would like to see.”

The first week of the month is always packed with key jobs data, culminating in Friday’s non-farm payrolls report. After a blockbuster Q1 for markets, a “three-rate-cut soft landing” appears to be as good as baked into the cake as far as equity investors are concerned. Inflation is behaving, U.S. growth is powering ahead and it would appear a given that the economy is generating jobs quickly enough to support consumer spending.

The focus, then, on this week’s array of jobs market data will likely fall on any indicators of wage pressure – something over which the Federal Reserve has little, to no, influence.

Today’s survey of March factory activity from the Institute for Supply Management is expected to show manufacturing contracted for a 17th straight month – the longest stretch since August 2000, following the dot com bubble burst and pushed the economy into recession.

That said, the index is expected to have risen to 48.4, from February’s 47.8, its highest since December 2022, according to a Reuters poll of economists.

The prices paid component is expected to have risen to 52.6, from 52.5 the previous month, reflecting the pick up in the cost of things like gasoline and food that pushed the broader producer price index up by more than expected in March.

Of more interest might be the employment sub-index, which last month came in at 45.9. Manufacturing only makes up a tiny portion of job growth – less than 10% of all employees on non-farm payrolls work in the factory sector, compared with over a quarter 50 years ago.

But the survey might offer a flavour of the overall trend in the jobs market.

Tuesday’s Job Openings and Labor Turnover Survey (JOLTS), which lays out hirings and firings, is likely to give a better sense of how tight the employment market is and what investors might expect to see in terms of average wage growth in Friday’s NFPs.

Key developments that should provide more direction to U.S. markets later on Monday:

* March ISM manufacturing survey

* Three- and six-month Treasury bill auctions