ISM Manufacturing and S&P Global show strength sending treasury yields higher. Rate cut expectations in March have been dampened and Silver closes in on a key support level.
Chris Chavez, Market Strategist
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Good afternoon, traders. It’s Chris Chavez with the Blue Line Futures and it’s your daily midday market minute. Treasury yields are moving higher here today off of better than expected manufacturing data. But before we get to it, if you’re watching this video like it, subscribe if you’re on our website, there’s also a link to direct you to YouTube. You can subscribe that way.
We would love for you to follow us. We would love for you to help us build our following. Yeah. So this morning we got some manufacturing data and also S&P Global Services and Global Composite, both of which showed improving conditions. Still, they came in slightly under expectations, but above that 50 level, which is still showing some improving conditions.
Now, looking at manufacturing ism, non-manufacturing, employment, new orders, PMI and prices all came in above expectations and above 50 level, which is signaling improving conditions. So, you know, you’re really starting to see a trough potentially in the manufacturing sector and that is what is full of fueling, you know, interest rates to continue to move higher, really exacerbating the move that we saw coming into the day.
Treasury yields were already moving higher. And then this data came out, which kind of sparked a second leg higher, if you will. Now, when you’re looking at the CME watch tool, there’s now a 14 and a half to 15% probability of a interest rate cut in March. So the market has just about gotten rid of all expectations of a cut that you’re going to see and pushed those back into some of those deferred months.
And when you’re looking at the Fed Funds Futures, Fed fund futures, you can now see 104 basis points worth of cuts being priced into the market. That is for 25 basis point cuts, and that compares to 6 to 7 interest rate cuts coming into this year. Really what is as change that? I mean, today’s a great testament to the data that we’re seeing.
Manufacturing is starting to trough. It looks like last week’s labor market data, we had many more jobs that were added to the economy versus expectations. Seeing the unemployment rate come in under expectations as well, really just showing the strength in the economy. Consumers are feeling confidence. Inflation expectations have come down and you’re continuing to see inflation itself come down as well, especially with PPE that we’ve seen as of late.
So really you’re seeing a large repricing of economic growth and the possibility that we may see interest rates just a little bit higher before we start to see the Fed cuts. And the markets are only pricing in 100 basis points worth of cuts versus previous estimates of 150, even pushing as high as the possibility of seven cuts coming into the year.
So that’s really what’s shifted this dynamic a little bit when looking at the markets today. The precious metals really getting slammed, specifically silver. Looking at the Russell 2000, the Russell is sharply underperforming its other broader indices, constituents like the S&P in the NASDAQ, the S&P in the Nasdaq are slightly off of their lows here today. But climbing back to try and enter positive territory.
Now, one thing I want to highlight is that this week there is not going to be a lot of economic data. More Fed speak and Treasury auctions. So you could see some interesting volatility in intraday sessions. You know, we might see a large spike higher or lower depending on what a voting member may or may not say. So those are really some of the important things to pay attention to this week.
Looking at some of these support and resistance levels, a three star support level for the S&P 4928 to 49, 31 and three quarters. Looking at the Nasdaq at three star support levels going to be 17 484 to 17 519. Looking at crude oil, a three star support level, 70, 62 to 70, 87 and silver a three star level 2204 to 2205.
If we broke below there and broke below 22, we could definitely see a bit more weakness. If you’d like to see some of these levels that we’re putting out, sign up for a free no commitment to be trial of our research at blue line futures dot com. Remember, futures trading involves substantial risk of loss and is not suitable for all investors.