Alright, let's dissect what happened on Monday. The headlines are screaming "market sell-off," but as usual, the devil's in the data. The S&P 500 took a -0.53% hit, the Dow Jones Industrials Index dropped -0.90%, and the Nasdaq 100 Index dipped -0.36%. December E-mini S&P futures (ESZ25) mirrored that with a -0.50% fall, while December E-mini Nasdaq futures (NQZ25) slid -0.36%. So far, so red. But is it a full-blown panic, or just a bad Monday?
Manufacturing Miss: Stagflation Signals or Just Noise?
Digging Deeper: The Manufacturing Miss
The ISM manufacturing index is where things get interesting. It unexpectedly fell -0.5 to a 14-month low of 48.2 in November. The consensus was expecting a *rise* to 49.0. That's a miss, and it suggests the manufacturing sector is still contracting. But, and this is a big but, the ISM *price paid* sub-index unexpectedly *rose* +0.5 to 58.5. Economists were predicting a *decline* to 57.5. So, input costs are rising even as manufacturing slows. Stagflation, anyone? (I'm already seeing the Twitter doomsayers light up.)
The China numbers don't exactly inspire confidence either. The November manufacturing PMI rose a measly +0.2 to 49.2, still below the 50 mark that separates expansion from contraction. The non-manufacturing PMI fell -0.6 to 49.5, the weakest in almost three years. That’s below the expected 50.0. Weak demand globally and domestically.
The 10-year T-note yield jumped +8 bp to 4.09%. Bond yields are rising, which could mean investors are anticipating more inflation, or that they are simply demanding a higher premium to hold government debt. It’s hard to tell which.
Stocks Retreat as Bond Yields Rise - Yahoo Finance.
Bitcoin, never one to be left out of a volatile day, tumbled more than -5% to a 1-week low. Meanwhile, WTI crude climbed more than 1% to a 1-week high. So, risk-off in crypto, risk-on in oil. What does that even mean?
BOJ, PBOC, and Bitcoin: A Week of Mixed Signals
BOJ and PBOC: Global Ripples
The Bank of Japan (BOJ) is hinting at further interest rate hikes. BOJ Governor Ueda suggested that the BOJ could raise interest rates again at this month’s BOJ meeting. The 10-year Japanese bond yields reached a 17-year high of 1.88% on Monday. If the BOJ tightens, it could put upward pressure on global interest rates.
The People’s Bank of China (PBOC) is taking a tougher stance on crypto. They stated that “risks of speculation and hype surrounding virtual currencies have resurfaced” and that virtual currencies do not have the same legal status as fiat currencies. This isn’t new, but the renewed warning suggests they are concerned about capital flight. I've looked at hundreds of these PBOC statements and the tone has gotten considerably more stern.
Here's a thought leap: how reliable *are* these PMI numbers coming out of China, really? We're taking them at face value, but the methodologies used to gather the data, and the potential for government influence, are always a question mark.
Finally, the CEO of Strategy mentioned that his firm could sell Bitcoin if its mNaV, the ratio of enterprise value to the value of Bitcoin holdings, goes below 1x. This is the part of the report that I find genuinely puzzling. Why would a company publicly announce its potential trigger for selling a volatile asset? It seems like a self-fulfilling prophecy waiting to happen.
Just a Monday Hangover?
The data paints a mixed picture. Weak manufacturing, rising input costs, global uncertainty, and crypto jitters. Is this the start of a deeper correction? Possibly. But it could also be a temporary pullback before the market resumes its upward trajectory. The key is watching the data in the coming weeks. We need to see if the manufacturing sector stabilizes, if inflation starts to cool, and if the BOJ and PBOC actually follow through with their hawkish rhetoric. Until then, it's all just noise.
It's All Just Noise (Until It Isn't)
