- The ISM Manufacturing and Services indices registered 49.0% and 56.5%, respectively, in November
- Continuing jobless claims hit a 10-month high of 1.67 million in the week ended December 3
- The 10-year Treasury bond yield hit an intraweek low of 3.40% last week
Top Three Market Headlines
Business Surveys Paint Mixed Picture: A pair of closely-watched surveys of business executives in November depicted diverging trends across different parts of the U.S. economy. The Institute for Supply Management (ISM) Manufacturing Index registered 49.0%, the first time since May 2020 it has fallen below the 50% mark that differentiates expansion of business activity (plus-50%) from contraction (sub-50%). November survey results indicated slowdowns across many facets of the manufacturing sector, including new orders, employment, prices, and order backlogs. On the other hand, activity in the services sector remained healthier, as the ISM Services Index recorded 56.5% for the month, up from 54.4% in October.
Jobless Claims on the Rise: In a sign that U.S. labor market conditions may be starting to soften, continued claims for unemployment insurance have increased by more than 50,000 for three consecutive weeks. Continuing claims (seasonally-adjusted) have been on an upward trend since mid-September, and the 1.67 million claims for the week ended December 3 was the highest level since late February. While this is still relatively low by historical standards, and other indicators such as the unemployment rate continue to reflect strong labor market conditions, the rise in continuing claims indicates that workers who have lost their jobs are having more trouble finding new ones.
U.S. Treasury Bond Yields Retreat: After hitting multi-year highs in late October, U.S. Treasury bond yields have been on a slow decline since. Last week the 10-year U.S. Treasury bond yield hit an intraweek low of 3.41%, down from a recent cycle high of 4.33% on October 21st. The retreat in yields has come amid lower-than-anticipated inflation readings and growing expectations of weakening economic conditions in 2023. With the Federal Reserve raising short-term interest rates to battle inflation, the recent decline in yields on longer-dated Treasuries has amplified the inverted state of the yield curve (i.e., when short-term yields exceed those of longer bonds), an occurrence that has often, though not always, presaged a recession.