The punch bowl was taken away from Treasuries on the first trading session of 2002 on Wednesday, with a thumping hangover from yet another chapter in the economic recovery story. Combined with marginal liquidity and some last minute revisionism ahead of payrolls, prices at the front-end and then the back-end of the yield curve extended their technical meltdown.
The December ISM (formerly NAPM) purchasing managers survey jumped to 48.2 from 44.5 and new orders (54.9) and two other key components rebounded above the 50 boom-bust line. Redbook (-3.9%) and BTM (+0.9%) weekly retail sales continued to show a mixed seasonal bag, but the market had eyes only for ISM.
Stocks added insult to injury, rallying late from an opening deficit on chip recovery hopes. Fed rate cut odds eased to 16% for the Jan. 30 policy meeting.