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).

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