ISM manufacturing PMI showed positive signs

The U.S. manufacturing sector showed some improvement, but still under the 50 threshold. The ISM’s manufacturing PMI reading for September rose to 49.0, its highest since November 2022. However, this is the 11th consecutive month that the PMI is below 50, indicating a contraction in manufacturing.

Despite this, growth projections for Q3 are estimated to be as high as a 4.9% annualized rate. Additionally, various manufacturing industries reported growth last month. However, industries related to computers, electronics, machinery, and electrical equipment showed contraction.

The ISM survey also indicated that new orders and factory production are on the rise. In addition, factory inventories remain low, which is a positive sign for future production.

The Employment Index recorded 51.2 percent in September, marking an increase of 2.7 percentage points from August's 48.5 percent. This suggests that employment experienced growth in September, following three months of decline. 

Seven industries saw a rise in employment: Petroleum & Coal Products, Food, Beverage & Tobacco Products, Primary Metals, Transportation Equipment, Chemical Products, Machinery, and Nonmetallic Mineral Products. 

Eight sectors experienced a decrease in employment: Printing & Related Support Activities, Furniture & Related Products, Textile Mills, Computer & Electronic Products, Plastics & Rubber Products, Miscellaneous Manufacturing, Fabricated Metal Products, and Electrical Equipment, Appliances & Components.

In terms of market reactions, shares of Caterpillar, an industrial heavyweight, saw a minor uptick of about 0.2%. Meanwhile, the Industrial Select Sector SPDR ETF (XLI) declined by around 0.4%. Broad market indicators like the S&P 500 remained relatively unchanged, and the Dow Jones Industrial Average experienced a slight dip of 0.2%.