ISM Manufacturing PMI Missed Expectations, Indicating A Faster Rate Of Contraction

Key Insights

• ISM Manufacturing PMI decreased from 47.1 in April to 46.9 in May. 
• S&P Global Manufacturing PMI declined from 50.2 to 48.4.
• U.S. Dollar Index settled below the 104 level as Treasury yields pulled back. 

On June 1, the Institute for Supply Management released its Manufacturing PMI report for May. The report indicated that ISM Manufacturing PMI declined from 47.1 in April to 46.9 in May, compared to analyst consensus of 47.

ISM commented: “The U.S. manufacturing sector shrank again, with the Manufacturing PMI losing a bit of ground compared to the previous month, indicating a faster rate of contraction. The May composite index reading reflects companies continuing to manage outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period.”

Today, traders also had a chance to take a look at the final reading of the S&P Global Manufacturing PMI report for May. The report showed that S&P Global Manufacturing PMI declined from 50.2 to 48.4.

The FedWatch Tool indicates that there is a 27.3% probability of a 25 bps rate hike at the upcoming Fed meeting in June. The rate hike probability has recently declined as traders reacted to the dovish comments from Fed officials.

Treasury yields continue to move lower as bond traders bet that the debt ceiling deal will pass through Congress. U.S. Dollar Index declined below the 104 level as traders focused on falling yields.

Gold settled above the $1970 level but failed to gain strong upside momentum. Gold markets showed little reaction to PMI numbers.

SP500 rebounded from session lows as traders bet that weak PMI data would push Fed to leave the federal funds rate unchanged at the upcoming meeting.

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