US Manufacturing Activity Continues to Shrink, May Manufacturing Purchasing Managers’ Index (PMI) Falls to 48.7, the Second Consecutive Month of Decline. The weak data brings hope for a September interest rate cut by the Federal Reserve, causing a significant drop in US bond yields. US stocks saw mixed movements on Wednesday, with Nvidia’s stock price reaching a new historical high.
The Institute for Supply Management (ISM) released data on the 3rd, showing that the US May Manufacturing Purchasing Managers’ Index (PMI) fell to 48.7, lower than economists’ expected 49.8 and lower than April’s 49.2. This marks the second consecutive month of decline and falls below the 50 threshold, reaching a new low in the past three months, highlighting further contraction in US manufacturing activity.
In addition, the US Census Bureau of the Department of Commerce released data on the same day, showing that US construction spending decreased by 0.1% in April, following a 0.2% decline in March. It was also far below the market’s expected growth of 0.2%, marking the second consecutive month of unexpected decline.
Increased Probability of Rate Cut in September
According to Reuters, the US GDP only grew by 1.3% in the first quarter. The latest ISM Manufacturing Index and construction spending indicate that the US economy continues to weaken in the second quarter. The GDP Now model of the Federal Reserve Bank of Atlanta previously estimated in May that the second-quarter GDP growth rate would be far above 2%. However, after the release of the latest ISM Manufacturing Index and construction spending, it has been revised down to only 1.8%.
Due to the Federal Reserve’s continued efforts to combat high inflation and maintain high interest rates, expenditures on manufacturing products and capital projects have remained weak. Data released last week showed a decline in consumer goods spending in April. The overall weakness in various data has increased market expectations for a rate cut by the Federal Reserve in September.
After the release of the ISM data, the FedWatch data shows a 51.3% probability that the Federal Reserve will lower the benchmark interest rate from the range of 5.25% to 5.50% to 5.0% to 5.25% in September. The probability of keeping the interest rate unchanged within the range of 5.25% to 5.50% is 40.1%.
US Stocks Show Mixed Movements
Due to the poor performance of US manufacturing data, market expectations for a rate cut by the Federal Reserve within the year have been strengthened. This has led to a further increase in US bond prices and a significant drop in bond yields on Wednesday, with the 10-year US Treasury yield falling by as much as 12.6 basis points to 4.391%, reaching a nearly three-week low.
US stocks opened higher on the 3rd but gradually turned downward, with minor fluctuations at the closing:
– Dow Jones Industrial Average fell 115.29 points, or 0.30%, to 38,571.03 points.
– S&P 500 Index slightly rose 5.89 points, or 0.11%, to 5,283.40 points.
– Nasdaq Composite Index rose 93.65 points, or 0.56%, to 16,828.67 points.
– Philadelphia Semiconductor Index increased by 29.16 points, or 0.57%, to 5,152.51 points.
In terms of individual stocks, during a speech by Nvidia CEO Huang Renxun at National Taiwan University Sports Center, he announced that Nvidia’s next-generation architecture platform, Rubin, will go into mass production in the fourth quarter of 2025 and be launched in 2026. It is rumored to adopt TSMC’s 3-nanometer process. Encouraged by this news, Nvidia’s stock price rose 4.89% on Monday, reaching $1,150.00, once again setting a new historical high and bringing the market value back above $280 billion.
Related Reports:
– US House Passes “Central Bank Digital Currency Anti-Monitoring Act” to Prevent the Federal Reserve from Issuing CBDC, Potentially Shaking the Global Status of the US Dollar?
– Federal Reserve Megaphone: Fed Maintains High Interest Rates Longer Than Expected, Goldman Sachs CEO Expects No Rate Cut until 2024.
– Will the Market Rise with a Federal Reserve Rate Cut? Historical Data Tells You Not to Be Too Naive.