{"id":189139,"date":"2023-04-21T12:30:00","date_gmt":"2023-04-21T16:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=189139"},"modified":"2023-04-21T12:43:58","modified_gmt":"2023-04-21T16:43:58","slug":"pmis-reflect-robust-conditions-in-april-underpinning-renewed-inflation-concerns-apr-21-2023","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/pmis-reflect-robust-conditions-in-april-underpinning-renewed-inflation-concerns-apr-21-2023\/","title":{"rendered":"PMIs Reflect Robust Conditions in April, Underpinning Renewed Inflation Concerns: Apr. 21, 2023"},"content":{"rendered":"\n

This morning\u2019s manufacturing and services data offered more surprises amidst mixed messages concerning the economy. At a time when investors are concerned about recession, inflation and the Federal Reserve, both the manufacturing and services sectors experienced sharp upticks in activity during April. Meanwhile, the equity market continues to maneuver like a rocking chair, back and forth between the S&P 500 ranges of 4100 and 4150.<\/p>\n\n\n\n

The Flash Purchasing Managers\u2019 Index (PMI) from S&P Global was a scorcher this morning, offering more confusion just a day after initial and continuing unemployment claims continued to reflect a slowing labor market. The services sector notched a 12-month high of 53.7, much higher than the 51.5 expected and achieving progress from last month\u2019s 52.6 reading. Meanwhile, the manufacturing sector crawled out of contraction territory, reaching 50.4, a five-month high and the same level as October. The 50.4 level trounced expectations of 49 and was higher than last month\u2019s 49.2.<\/p>\n\n\n\n

Executives from both the goods and services sectors reported strong purchasing activity, robust hiring and elevated output. At the same time, however, cost pressures accelerated significantly, leading to renewed inflation concerns against the backdrop of a still hawkish Federal Reserve (Fed). Prices in both sectors rose at the fastest pace since September of last year. Taken together and consistent with our in-house inflation models and the Cleveland Fed\u2019s inflation nowcast<\/a>, April inflation is expected to be significantly hotter than March. <\/p>\n\n\n\n

Markets aren\u2019t sure how to react to the recent confluence of conflicting economic information. Initially, the S&P 500 Index opened flat and drifted higher. Subsequently, it declined as much as 0.4% following the 9:45 am PMI release and is now roughly flat at 4130. The interest rate sensitive Nasdaq Index has fared similarly, nearly unchanged against the backdrop of some of the lowest volatility readings we\u2019ve seen in over a year and change. The VIX was at 16.81 after aggressively breaking below an established intermediate term floor of around 20 since January of last year. Bonds yields are higher at the shortest end (1- and 2-month maturities) while the rest of the curve and the dollar are roughly unchanged. WTI crude oil is up 0.8% to $78.00 per barrel, propelled by hotter-than-expected economic data looking ahead to the summer driving season.<\/p>\n\n\n\n

Despite the strong PMI readings today, earnings reports among cyclical companies this week have discussed weakening demand for products and services. They include the following:<\/p>\n\n\n\n