When is the US ISM Manufacturing PMI and how could it affect S&P 500?

Haresh Menghani FXStreet

US ISM Manufacturing PMI overview

The Institute of Supply Management (ISM) will release its latest manufacturing business survey result, also known as the ISM Manufacturing PMI at 14:00 GMT this Wednesday. The index is anticipated to fall from 59.5 to 58.6 in August, still pointing to a robust expansion in the manufacturing sector activity. Given that the Fed looks more at the labour market and inflation than growth, investors will keep a close eye on the Employment and Prices Paid sub-component.

According to Yohay Elam, FXStreet's own analyst: Lower estimates make sense after two consecutive disappointments and drops – and also like the spread of the Delta covid variant weighs on business sentiment. Nevertheless, it may be marginally too pessimistic.

How could it affect S&P 500?

Investors now seem convinced that the Fed would wait for a longer period before scaling back its massive pandemic-era stimulus measures. A softer reading will further dampen prospects for an earlier than expected lift-off and boost investors' appetite for perceived riskier assets. This, in turn, should pave the way for an extension of the recent strong bullish run in the S&P 500.

Conversely, a stronger print could ease worries about the potential economic fallout from the spread of the Delta variant of the coronavirus. This should remain supportive of the prevalent risk-on environment, suggesting that the path of least resistance for the index is to the upside.

Key Notes

• S&P 500 Index to accelerate its race higher beyond 4600 – Credit Suisse

• S&P 500 to hit the 5,000 level by the end of next year – UBS

About the US ISM manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Index shows business conditions in the US manufacturing sector. It is a significant indicator of the overall economic condition in the US. A result above 50 is seen as positive (or bullish) for the USD, whereas a result below 50 is seen as negative (or bearish).

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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