Momentum compass: PMI and yield changes influence US market recovery
Discover the impact of PMI readings and Treasury yield fluctuations on US indices, with insights into upcoming economic data and market trends.
Last week’s US performance
The trading week saw varied performance across major US indices, with a strong Friday session helping to cushion earlier declines amid low volume trading due to the post-festive season. December's Chicago purchasing managers index (PMI) reading of 36.9 fell significantly below the expected 42.9, marking the 13th straight month of contraction.
The Atlanta Fed revised its quarter 4 (Q4) gross domestic product (GDP) forecast downward from 3.1% to 2.6%, weighing on market sentiment. Initial jobless claims provided a bright spot, coming in at 211,000 for the week ended 28 December, kick-starting a recovery in US stock indices.
Treasury yields and market uncertainty
US Treasury yields range traded before declining into year-end across the board, with longer-dated bonds showing the weakest performance. The bond market moves reflect ongoing uncertainty about the inflation picture in the US.
Yield movements continue to influence broader market trading activity, with the US 10-year yield holding above the 4.50% mark but staying below its late December peak at 4.64%. Investors are closely monitoring the US 10-year Treasury bond yield for a potential rise above the 4.65% mark, which may weigh on US stock indices.
US 10-year Treasury bond yield chart
Week ahead: key economic data
On Monday, a series of promising services PMI readings provided insight into economic activity across major European economies. Higher-than-expected German consumer price inflation (CPI) didn’t negatively affect the German stock market, with the DAX 40 index rising by around a percentage point by midday.
US factory orders, industrial production, and retail sales data will offer further economic context. Eurozone inflation figures out on Tuesday will be closely watched by forex trading participants, with the US dollar already trading lower by a percent on Monday. US employment reports later in the week will be crucial for market direction, especially US non-farm payrolls on Friday.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get commission from just 0.08% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
