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Major market averages opened trading lower on Wednesday with some pessimism on global growth after weak Chinese data.
Early on and the Dow (DJI) lost 0.6%, the S&P 500 (SP500) dipped 0.5%, and the Nasdaq Composite (COMP.IND) slid 0.2%.
China’s official NBS Manufacturing PMI unexpectedly fell to a five-month low of 48.8 in May
Despite “some of the headline gains, the last 24 hours have seen several warning lights under the surface, including multiple recession indicators that are flashing with growing alarm,” Deutsche Bank’s Jim Reid said.
Rates were lower as the debt ceiling bill moves forward. It passed out of the House Rules Committee by one vote and the full House is expected to vote on it tonight.
The 10-year Treasury yield (US10Y) fell 3 basis points to 3.66%. The 2-year yield (US2Y) fell 10 basis points to 4.37%.
“Indeed, one of the good news stories from yesterday was that T-bill yields around the X-date fell back to more normal levels again, with the bill expiring June 8th seeing yields fall -75bps to 5.05, after having briefly traded with a 7 handle last week,” Reid said. “Also the 1M US Treasury yield is trading at the same level of swaps for the first time since early May, and at the same time 5yr CDS spreads for the US dropped back to their lowest level since March, which shows how fears of default have continued to ebb over recent days.”
Focus is shifting from default to data as the markets now price in a 65% chance of a quarter-point Fed hike in June.
On the economic front the Chicago PMI for May came in at 40.4 versus the 47.0 consensus figure and 48.6 reading in April.
April JOLTS numbers came in at 10.103M versus the 9.350M consensus and 9.745M prior number.
The Fed’s Beige Book of regional economic activity is released this afternoon. Fed Governor Michelle Bowman speaks before the bell. Philly Fed President Patrick Harker and Fed Governor Philip Jefferson weigh in early afternoon.
Among active stocks Advanced Auto Parts (AAP) plunged by 25% after it slashed quarterly dividends by 83%.
