April flash PMI shows services holding at 52.0 while manufacturing slips to 49.8, the widest sector divergence since October. Treasury yields edge lower.
Alpha Score of 30 reflects poor overall profile with weak momentum, poor value, moderate quality, poor sentiment.
The flash Composite PMI for April printed at 51.2, down from 51.7 in March. The headline still points to expansion. The internals tell a different story.
Services held at 52.0, barely changed from 52.1. Manufacturing dropped to 49.8 from 50.2, slipping back into contraction territory for the first time in three months. The divergence between the two sectors is now the widest since last October.
New orders in manufacturing fell for the second straight month. The sub-index dropped to 48.9 from 49.5. Firms cited weaker export demand and a pullback in capital spending. Employment in the sector also contracted, with the jobs sub-index at 49.2.
Services new orders ticked up to 51.8 from 51.5, driven by domestic demand. The pace of hiring slowed. The services employment sub-index fell to 50.3 from 51.0, the lowest reading since January.
Input cost pressures eased in both sectors. The composite input price index fell to 58.4 from 59.8, the lowest in six months. Output prices also moderated, suggesting firms are absorbing some of the margin squeeze rather than passing it through.
The data reinforces the narrative of a two-speed economy. Manufacturing is struggling under the weight of a stronger dollar and softer global demand. Services are holding up. The labor market signal is weakening. The composite reading of 51.2 is consistent with GDP growth of roughly 1.5% annualized, below the 2%+ pace seen in the second half of last year.
Treasury yields edged lower after the release. The 2-year yield slipped 3 basis points to 4.72%. The 10-year yield fell 2 basis points to 4.58%. The curve steepened slightly, with the 2s10s spread widening to -14 basis points from -15.
The dollar index dipped 0.1% on the session. The euro ticked up to $1.0830 from $1.0815. Sterling held near $1.2650.
Equity futures turned mixed. S&P 500 futures were flat. Nasdaq futures added 0.2%, helped by the services resilience. Dow futures slipped 0.1%.
The flash PMI is the first hard data point for April. The final reading, due in two weeks, will incorporate a fuller survey sample. The divergence between services and manufacturing is the key variable for the next Fed meeting. If the weakness in manufacturing spreads to services, the case for a rate cut in September gets stronger. If services hold, the Fed stays on hold.
Friday's durable goods report will show whether the manufacturing weakness is concentrated in a few sectors or broad-based.
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