Daily Market Color

Slight Risk on Trade With Data in Focus

US stocks are opening the week higher while Treasuries are selling off marginally as investors assess the impact of a variety of economic releases.  The key report released this morning was the US April ISM manufacturing survey, which showed US manufacturing has stabilized, but still faces challenges.  The headline number decreased to 50.8 in April, down from 51.8 March and below market expectations of 51.4.  Despite the headline decline, the index remained in expansionary territory (>50) for the second straight month, and more sectors reported an increase in production and new orders in April compared with March.  There was also a large jump in the prices paid index, which strongly correlates with commodity prices.  The manufacturing sector continues to face headwinds from slow global growth, but a three-month decline in the dollar and the recent increase in oil and other commodity prices should continue to help spur activity.  A separate report from the Commerce Department showed construction spending increase 0.3%, reaching an 8.5 year high in March. 

Trading volumes are subdued with markets closed for holidays in China/Hong Kong and the U.K and Golden Week in Japan.  Aside from the data, markets this week will closely watch a variety of scheduled Fed speakers including Lockhart (hawk, non-voter), Williams (moderate, non-voter), and Dudley (dove, voter).  Also noteworthy are WTI and Brent crude down today 2% and 2.5%, respectively, off the back of a report of near-record production from Iraq, which added to concerns over the global supply glut.
All three major US stock indexes are up close to 0.50%, while Treasury yields and swap rates are 1-3 bps higher across the curve.


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