Released Tuesday morning, the ISM's manufacturing PMI (Purchasing Managers' Index) print came out hotter than expected at 50.3, against forecasts for 48.3. The Federal Reserve may now be anticipated to lower the number of full interest rate cuts for 2024 below three on this print.

Morning Brief Anchors Brad Smith and Jared Blikre break down the data.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

Editor's note: This article was written by Nicholas Jacobino and updated by Luke Carberry Mogan.

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Well, in the absence of big corporate results data, data is ruling the markets. Economic data futures are lower this morning, following a down day for the markets. Stocks fell stronger than expected. Manufacturing data that weighed on hopes for possible Fed rate cuts. ISM's manufacturing PMI registered a reading of 50.3 in March, the first expansion for the sector since 2022 here Jared. They said, within this report--

JARED BLIKRE: It's a big one.

BRAD SMITH: I know, the overall economy continued the expansion for the 47th month after one month of contraction in April 2020, they mentioned. But the new orders index as well here, moving back into expansion territory here, noteworthy in this report as well.

JARED BLIKRE: And a fraction of rate cuts were taken off the table. So we're seeing now we're closer to 2 and 1/2 rate cuts this year than 3. And that number keeps getting smaller and smaller. So the calculus-- calculus at the Fed really front and center in investors' minds.

And let me go to the Wi-Fi interactive here for a second, where I can show the bond market. This is a 10-year T note yield, this is a three-month chart. Basically what's happened this year, and today, we are breaking into what amounts to a new high for 2024. Here is a three-year look. And you can see really much in the upper end of this range. And what's interesting is higher rates have been historically a headwind for stocks, but we'll have the opportunity to talk about this more in the second.

Let me just show you what the sector action is looking like yesterday, and then also pre-market, that is our NASDAQ 100 we're going to go to. This is what happened yesterday. Communication services, despite rates being up, was up 77 basis points, so was tech in the green, so was energy. And then here are the pre-market quotes, we can see energy is really all that's in the green right now. Up half a percent consumer discretionary, health care down more than 1% in premarket trading.

BRAD SMITH: Yeah as you're mentioning these sectors, one of the huge things that comes to mind, of the six biggest manufacturing industries for food, beverage, and tobacco products, fabricated metal products, chemical products. And then transportation equipment which account for a combined 54% of manufacturing gross domestic product, registered growth in the month of March, according to this report here. And they also said that demand remains at the early stages of recovery within this. So that's something to continue to watch, especially how the Fed, at their next meeting, tries to really take this all into account with their policy pathway.