Stock markets fell in cautious trading Tuesday as investors worried that headwinds are gathering for the US economy, outweighing hopes that recent weak data would prompt the Federal Reserve to start cutting interest rates.
The uncertainty also pushed down oil prices and global energy firms, as the prospect of slackening demand worldwide came just as the OPEC+ alliance said it would roll back production cuts starting in October.
Investors have shifted nervously in recent weeks on concerns the Fed will not cut interest rates until 2025 as inflation remains stubbornly above target and decision-makers warned against moving too early, insisting on seeing more evidence that price rises are under control.
But fears of persistent economic weakness have moved to the fore, after the Institute for Supply Management (ISM) said Monday that its manufacturing index showed that US activity contracted for a second successive month in May.
The figures indicated that businesses were struggling with elevated interest rates and weak consumer spending, among other things.
“The manufacturing ISM data reaffirmed several prevailing economic trends: decelerating inflation, slowing growth, and a tight labour market,” said Gary Pzegeo of CIBC Private Wealth US.
“We should see higher odds of a rate cut later this year priced into interest rate futures.”
BMO…
