Dallas Fed Manufacturing Index Exceeds Expectations, Stocks Remain Under Pressure

Key Insights

• Dallas Fed Manufacturing Index increased from -18.8 to -8.4.
• Survey responses indicated that recession worries persisted. 
• Stocks continued to move lower after the release of the report. 

Dallas Fed Manufacturing Index Remains In The Negative Territory

On January 30, U.S. reported that Dallas Fed Manufacturing Index improved from -18.8 in December to -8.4 in January, compared to analyst consensus of -11. The index has remained in the negative territory for 9 months in a row.

The survey respondents from primary metal manufacturing noted that recession was on its way. They also noted that “residential building and construction industry has seen a significant decrease in orders across the extrusion industry.”

The report exceeded analyst expectations but remained in the negative territory, which highlights the pressure felt by the economy. At the same time, it should be noted that this report will not change Fed’s thinking ahead of the Interest Rate Decision, which will be released on Wednesday.

Stocks Keep Moving Lower After The Report

S&P 500 remained under significant pressure after the release of the Dallas Fed Manufacturing Index data. Most likely, traders are not worried about the report. They want to reduce their risks ahead of the Fed Interest Rate decision. The Fed is expected to raise the federal funds rate by 25 bps. If the Fed’s commentary is more hawkish than markets expect, stocks may suffer a strong sell-off.

U.S. dollar moved higher after the release of the report. From a big picture point of view, the U.S. Dollar Index continues to consolidate near the 102 level. It remains to be seen whether the report will have a material impact on currency dynamics today as traders stay focused on the upcoming Fed decision.

Gold  moved lower as the U.S. Dollar Index climbed back above the 102 level. However, the reaction to the report was muted. The upcoming Fed decision remains the key event for gold markets this week, so traders may ignore other data in the remaining days ahead of the decision.

For a look at all of today’s economic events, check out our economic calendar.