ISM Manufacturing PMI Falls Short of Analyst Expectations

• The ISM Manufacturing PMI stayed the same in November.
• The New Orders Index increased from 45.5 in October to 48.3 in November.
• The U.S. Dollar Index decreased from its session highs as traders responded to the report that was weaker than anticipated.  

 On December 1, the Institute for Supply Management published its ISM Manufacturing PMI report for November. The report revealed that the ISM Manufacturing PMI held steady at 46.7, in contrast to the analyst consensus of 47.6. Any figure below 50 indicates a contraction.

The report confirmed that economic activity in the manufacturing sector decreased for the 13th consecutive month.

The New Orders Index rose from 45.5 in October to 48.3 in November, while the Production Index decreased from 50.4 to 48.5.

The Institute for Supply Management remarked: "The U.S. manufacturing sector continued to contract at the same rate in November as compared to October [...] Demand remains soft, and production execution is slightly down compared to October, as panelists’ companies continue to manage outputs, material inputs, and – more aggressively – labor costs."

Following the release of the ISM Manufacturing PMI report, Treasury yields declined. Bond traders anticipate that the manufacturing sector's weakness will compel the Fed to reduce rates in the first half of next year.

The U.S. Dollar Index moved away from its session highs as traders paid attention to the retreat in Treasury yields. At present, the U.S. Dollar Index is attempting to settle below the 103.50 level.

Gold returned towards the $2050 level, supported by the drop in Treasury yields. Market sentiment in the gold markets remains positive.

The S&P 500 rallied towards the 4575 level after the report was released. Fed policy remains the primary catalyst for stocks, so a report that falls short of expectations may offer additional support to equity markets.