Massive Rally Kicks off Payrolls Week  

Weak PMI level eases concerns of Fed overtightening, boosts markets. Treasurys surged today after U.S. PMI unexpectedly fell to 50.9 in September, revealing the slowest growth in factory activity since 2020. The slowing economy resulted in a dramatic yield dip, the 2 and 10-year yields falling to 4.11% and 3.64%, respectively. These yield dips were slightly offset by hawkish commentary from Fed member John Williams, who urged that the Fed has more work to do to tame inflation. Elsewhere, equities were also boosted by the weak data, with both the S&P 500 and NASDAQ seeing 2.25%+ increases on the day.

Construction spending release reveals slowing activity. The US Construction Spending index declined 0.7% MoM from July to August, a steeper drop than the 0.3% expected decline. Private construction spending was down 0.6%, while public spending was down 0.8%. A lower-than-expected reading is a negative signal for economic growth, but a sign the Fed’s rapid interest rate hikes are being felt.

Day ahead. Fed commentary will be plentiful, with 3 members to make comments in the morning and 2 others to speak as late as 1:00 PM ET. JOLTs job opening data for the month of August will be released at 10:00 AM ET.