What We Are Watching This Week
- Consumer Price Index
- Producer Price Index
- Consumer Sentiment
- Bank of Canada Rate Announcement
Highlights From Last Week
- ISM Manufacturing, Factory Orders, and ISM Services
- Job Openings and ADP employment
- US Nonfarm Payrolls
- Consumer Credit
During the week, the large-cap indexes retreated from record highs, with U.S. Treasury yields rising in response to indications of potential growth in the manufacturing sector. Market performance narrowed, with growth stocks outperforming value shares and large-caps declining less than small-caps. Energy stocks saw strong performance due to concerns over rising tensions between Israel and Iran, alongside a decision by major exporters to maintain production limits despite tight markets, leading to a surge in oil prices to their highest level since October. The late strength of Microsoft also boosted the technology sector. The TSX bucked the trend of the major US indices, posting a solid performance in the week aided by a surge in crude prices. In Europe, the pan-European STOXX Europe 600 Index fell 1.19%, halting a 10-week streak of gains amid hawkish comments from some U.S. Federal Reserve policymakers and higher crude oil prices, casting uncertainty on interest rate cut timing. France’s CAC 40 Index dropped 1.76%, Germany’s DAX weakened 1.72%, Italy’s FTSE MIB lost 2.13%, and the U.K.’s FTSE 100 Index declined 0.52%.
In March, the Manufacturing PMI® increased to 50.3 percent, up by 2.5 percentage points from February. This marks the 47th consecutive month of expansion in the overall economy. The New Orders Index rose to 51.4 percent, while the Production Index surged to 54.6 percent. The Prices Index also increased to 55.8 percent. Despite the overall expansion, the Backlog of Orders Index remained at 46.3 percent, and the Employment Index slightly increased to 47.4 percent. Demand improved, as reflected in the expansion of the New Orders and New Export Orders Indexes. Output strengthened, with panelists’ companies notably increasing production levels. However, head-count reductions continued, indicating ongoing layoff activity. Inputs remained accommodative, with signs of stiffening observed. Four of the six largest manufacturing industries reported growth, including Food, Beverage & Tobacco Products, Fabricated Metal Products, Chemical Products, and Transportation Equipment. Overall, while the manufacturing sector moved into expansion for the first time since September 2022, demand remains in the early stages of recovery. Production execution surged compared to previous months, but suppliers are struggling due to disruptions in raw material supply chains. Despite these challenges, the sector shows signs of improvement, with a healthier distribution of PMI® calculations among the top industries.1
The Commerce Department reported a 1.4% rebound in orders for manufactured goods in February, following two consecutive monthly declines. This increase surpassed the 1% gain anticipated by economists surveyed by Wall Street Journal. Durable goods orders rose by a revised 1.2% in February, slightly lower than the previously estimated 1.4% gain. Meanwhile, non-durable goods orders increased by 1.6% in February, rebounding from a 0.8% drop in the previous month. Orders for nondefense capital goods, excluding aircraft, saw a 0.7% rise in February, consistent with the prior estimate. However, shipments of these crucial orders experienced a 0.6% decline.2
In February, the U.S. Bureau of Labor Statistics reported that the number of job openings remained relatively stable at 8.8 million. Hires and total separations saw minimal changes, at 5.8 million and 5.6 million, respectively. Within separations, quits and layoffs/dismissals showed slight variation. Job openings increased in finance and insurance, state and local government (excluding education), and arts, entertainment, and recreation sectors. However, job openings decreased in the information and federal government sectors.3
In March, employers added 184,000 workers, surpassing expectations and signaling strong performance in the U.S. economy for 2024. The monthly survey by private payroll firm ADP, released on Wednesday, also revealed a 5.1% annual wage increase, outpacing inflation and potentially boosting consumer spending. Economists had predicted a gain of 150,000 jobs, following an upwardly revised estimate of 155,000 in February, initially reported as 140,000. This increase, the largest since July, was primarily driven by a rise of 63,000 jobs in the leisure and hospitality sector. Notably, gains were seen across small, mid-sized, and large companies, indicating broad-based growth. The services sector accounted for 142,000 of the 184,000 jobs added.4
In March, economic activity in the services sector continued its expansion for the 15th consecutive month, as indicated by the Services PMI registering 51.4 percent, according to the latest Services ISM Report On Business by the nation’s purchasing and supply executives. This sector has experienced growth in 45 of the last 46 months, except December 2022. The Services PMI® for March decreased by 1.2 percentage points compared to February’s reading of 52.6 percent. However, the composite Index still signified growth for the 15th consecutive month, following a reading of 49 percent in December 2022, which marked the first contraction since May 2020. The Business Activity Index rose to 57.4 percent in March, slightly higher than February’s 57.2 percent. The New Orders Index expanded for the 15th consecutive month in March, although it decreased to 54.4 percent from February’s 56.1 percent. However, the Employment Index contracted for the third time in four months, with a reading of 48.5 percent in March, compared to 48 percent in February.5
In the week ending March 30, the seasonally adjusted initial claims for unemployment benefits were 221,000, marking an increase of 9,000 from the previous week’s revised level. The last week’s figure was revised upward by 2,000, from 210,000 to 212,000. The 4-week moving average stood at 214,250, showing an increase of 2,750 from the previous week’s revised average. The total number of continued weeks claimed for benefits across all programs for the week ending March 16 was 2,038,116, representing an increase of 1,035 from the previous week. In the comparable week of 2023, there were 1,905,338 weekly claims filed for benefits across all programs.6
In March, job creation surpassed expectations, reflecting the continued acceleration of a robust labor market. Nonfarm payrolls increased by 303,000, well above the Dow Jones estimate of a 200,000 rise and higher than the revised gain of 270,000 in February, as the Labor Department’s Bureau of Labor Statistics reported. The unemployment rate edged lower to 3.8%, in line with expectations, while the labor force participation rate rose to 62.7%, marking a gain of 0.2 percentage points from February. However, a broader measure, including discouraged workers and part-time positions, held steady at 7.3%. Average hourly earnings rose by 0.3% for the month and 4.1% from a year ago, aligning with Wall Street estimates. Job growth stemmed from various sectors, with healthcare leading at 72,000, followed by government (71,000), leisure and hospitality (49,000), and construction (39,000). Retail trade contributed 18,000 jobs, while the “other services” category added 16,000. The February revision was slightly lower by 5,000, and the January revision increased by 27,000 to 256,000, still below the initial estimate of 353,000. Economist Lauren Goodwin remarked on the report’s strength and its indication of broadening job creation. However, the unemployment rate for Black individuals surged to 6.4%, a gain of 0.8 percentage points, tying the highest level since August 2022. Conversely, rates for Asians and Hispanics declined sharply to 2.5% and 4.5%, respectively. Despite positive job gains, signs of cracks in the labor market include modest growth in household employment over the past year and a decline in temporary employment. The household survey, used to calculate the unemployment rate, posted a robust gain in March, up by 498,000, surpassing the civilian labor force level increase. Part-time workers saw significant gains in the household survey, with full-time workers decreasing by 6,000 and part-timers increasing by 691,000. Multiple job holders rose by 217,000, comprising 5.2% of the total employment level. Market attention has been focused on employment data, particularly as the Federal Reserve deliberates its next moves on monetary policy.7
| WK | Year to Date | |
| Dow | -2.27% | 3.22% |
| S&P500 | -0.95% | 9.11% |
| Nasdaq | -0.80% | 8.24% |
| S&P400 Mid-cap | -1.88% | 7.46% |
| Russell | -2.87% | 1.80% |
| TSX | 4.00% | 6.20% |
| Oil | 4.30% | 21.00% |
- https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/march/
- https://www.census.gov/manufacturing/m3/prel/pdf/s-i-o.pdf
- https://www.bls.gov/news.release/jolts.nr0.htm
- https://adp-ri-nrip-static.adp.com/artifacts/us_ner/20240403/ADP_NATIONAL_EMPLOYMENT_REPORT_Press_Release_2024_03%20FINAL.pdf
- https://www.ismworld.org/supply-management-news-and-reports/news-publications/inside-supply-management-magazine/blog/2024/2024-04/report-on-business-roundup-march-2024-services-pmi/
- https://www.dol.gov/ui/data.pdf
- https://www.bls.gov/news.release/empsit.nr0.htm
Important Information:
Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.
Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF). Sightline provides management and investment advisory services to high-net-worth individuals and institutional investors.
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