PMI Surge Lifts Yields, Sparks Hawkish Fed Signals

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PMI Surge Lifts Yields, Sparks Hawkish Fed Signals

-0.04 Chicago Fed National20,000 ADP Employment Change1.8m API Weekly Crude Oil7.12 MBA 30-Year Mortgage Rate58.40 S&P Global Composite PMI

S&P 5007,704.13-0.02%

US 10Y Treasury5.18%+7 bp

WTI Crude93.06-1.64%

Gold4,342.10+1.03%

Market Snapshot

Asset	Level	Change
S&P 500	7,704.13	-0.02%
Nasdaq 100	30,478.86	+0.03%
Dow Jones	51,349.98	-0.31%
Russell 2000	2,835.57	-0.11%
USD/JPY	157.82	-0.28%
EUR/USD	1.14	+0.18%
GBP/USD	1.32	+0.02%
Gold	4,342.10	+1.03%
WTI Crude	93.06	-1.64%
Bitcoin	84,760.88	+0.45%
US 2Y Treasury	4.85%	+14 bp
US 10Y Treasury	5.18%	+7 bp

Prior Economic Events

Data	Prior	Cons	Actual
Fed Goolsbee Speech	-	-	-
Chicago Fed National Activity Index	0.08	-	-0.04
ADP Employment Change Weekly	16,250	-	20,000
Speech by Fed's Williams	-	-	-
Speech by Fed's Jefferson	-	-	-
Speech by Fed's Barkin	-	-	-
API Weekly Crude Oil Stocks	7.1m	-500,000	1.8m
MBA 30-Year Mortgage Rate	6.97	-	7.12
S&P Global Composite PMI Flash	56	-	58.40
S&P Global Manufacturing PMI Flash	53.90	53.60	57

Today's Economic Events

Data	Prior	Cons	Time
Durable Goods Orders Month-over-Month	1.10	-0.40	04:30
Durable Goods Orders Ex Transp Month-over-Month	0.40	0.60	04:30
Speech by Fed's Schmid	-	-	05:20
Michigan Consumer Sentiment Final	51.70	47.60	06:00
Fed Hammack Speech	-	-	10:00

S&P Global flash PMIs beat expectations across manufacturing and services, signaling stronger growth
US 2-year Treasury yield jumped 14 bp to 4.85% while 10-year rose 7 bp to 5.18%
Mortgage rates climbed to 7.12%, adding pressure on housing affordability

Yesterday's Recap

Equity indices closed mixed with the S&P 500 at 7,704.13, down 0.02 percent, while the Nasdaq 100 edged up 0.03 percent to 30,478.86 and the Dow Jones fell 0.31 percent to 51,349.98. The Russell 2000 slipped 0.11 percent to 2,835.57. Treasury yields rose sharply as the 2-year yield increased 14 basis points to 4.85 percent and the 10-year yield gained 7 basis points to 5.18 percent.

S&P Global flash PMIs exceeded forecasts, with the composite at 58.4, manufacturing at 57.0 versus a 53.6 consensus, and services at 58.7. The Chicago Fed National Activity Index printed negative 0.04 against a prior 0.08. EIA crude inventories rose 2.969 million barrels, far above the expected draw, while gasoline stocks fell 1.686 million barrels.

The MBA 30-year mortgage rate increased to 7.12 percent from 6.97 percent. Multiple Federal Reserve speakers including Goolsbee, Williams, Jefferson, Barkin and Barr addressed audiences without altering policy signals. Gold advanced 1.03 percent to 4,342.10 while WTI crude declined 1.64 percent to 93.06.

Broader context shows resilient activity amid 3.4 percent CPI and 4.1 percent unemployment, with GDP growth at 1.5 percent quarter-over-quarter.

The Day Ahead

Durable Goods Orders are scheduled for release with consensus expectations of a 0.4 percent decline after a 1.1 percent prior gain. The ex-transportation component is projected to rise 0.6 percent. Michigan Consumer Sentiment final reading is expected at 47.6, down from 51.7.

Federal Reserve speakers Schmid and Hammack are set to address audiences. Market participants will monitor any comments on inflation risks and the path for policy rates given the recent hawkish tone from officials. Oil inventory data and any updates on geopolitical developments will also influence sentiment.

The 3.88 percent Fed funds rate remains the anchor, supported by 2.1 percent year-over-year GDP expansion and steady retail sales growth of 6.01 percent.

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Other Economic Notes

Mortgage rates reaching 7.12 percent have intensified pressure on an already weak housing market, reducing affordability and transaction volumes. Stronger PMI readings contrast with softer activity indicators such as the Chicago Fed index, highlighting uneven momentum across sectors. Elevated crude inventory builds point to ample supply despite geopolitical tensions, keeping downward pressure on energy prices.

Broader data including 3.4 percent CPI, 4.1 percent unemployment and 1.5 percent GDP growth underscore a resilient yet cooling economy that supports the current 3.88 percent Fed funds rate. API crude stock gains of 1.786 million barrels further confirm loose energy balances.

Global Macro News

US-Iran tensions have kept oil markets volatile, with WTI crude falling despite supply concerns that could affect global growth. Hawkish Federal Reserve signals have supported the dollar, pushing USD/JPY lower to 157.82 while EUR/USD rose to 1.14. Tariff disputes with Canada threaten supply chains for US retailers and manufacturers reliant on cross-border inputs.

Nigeria and the United States signed a mining investment pact valued near 700 billion dollars, potentially expanding US resource access. Gold prices climbed to 4,342.10 as investors sought safety amid equity uncertainty and geopolitical risks. Stronger US data relative to global peers has reinforced expectations for sustained US rate differentials versus other major central banks.

Continuation

Fed Watch

Stronger-than-expected PMI prints reinforced views that the Federal Reserve will maintain its current 3.88 percent policy rate for longer amid persistent inflation risks near 3.4 percent. Multiple speakers including Williams and Barr delivered hawkish remarks that lifted October rate-hike probabilities to 73 percent in market pricing. The 14 basis point surge in the 2-year yield to 4.85 percent reflects expectations of a higher terminal rate path.

Forward guidance continues to emphasize data dependence without committing to near-term easing, consistent with the committee's recent hold decision. Rising mortgage rates to 7.12 percent illustrate the transmission of higher policy expectations into consumer borrowing costs. Markets now price limited scope for cuts this year given resilient growth signals and the 2.1 percent year-over-year GDP expansion.

US Macro Daily(Beta Mode)