Incoming Stock Market Push from US PMI

The US stock markets are about to be impacted by the latest PMI (Purchasing Managers’ Index), which will add to the growing economic data that is moving the market in its current direction.

Stocks are already elevated at the start of this week, opening with the Dow Jones up by 0.19% when it was already high from Friday’s close. The S&P is likewise elevated with an increase of 0.34%. Likewise, the Nasdaq Composite is up 0.35% at the time of this writing.

US stocks have benefitted from the recent interest rate cuts issued by the US central bank. Those cuts took 50 basis points off of the high interest rates and brought them a little closer to where the Fed wanted to see them. The Fed also promised more cuts to come in 2025, perhaps cutting the rates by another 100 points before the end of next year.

The stock market has also seen a boost in recent weeks because of low unemployment and decreasing inflation. As the US economy makes slow and gradual recovery, the stock market is seeing record highs and substantial growth.

The Fragile Undercurrent

Investors should be careful about putting too much confidence in the stock market at this time, though, as the market is still experiencing volatile and fragile conditions stemming from recent years of recession. The effects of the pandemic and its impact on business are still being felt, with inflation high, interest rates elevated, and unemployment also high.

While we are seeing the economy recover, that is happening slowly, and it only takes some small negative economic news to tilt the market back in the other direction.

The US PMI data coming later this week is going to be joined by PMI reports from Europe and Asia as well. We anticipate that these reports will impact the US dollar, as they directly affect its usage abroad. How these PMI reports turn out will definitely influence where interest rate decisions are headed, particularly as the global economy is still trying to avoid further recession.

Last month, the US PMI rose to 3.2% after an increase of 0.3%. Because inflation is still elevated and well above the target rate of 2% desired by the Federal Reserve, the US PMI will dictate what the Fed’s next move is.