The Institute for Supply Management is expected to report at 10:00 EDT that their survey of conditions in the manufacturing sector held below 50 – signaling contraction – for the fifth consecutive month at 49.0. In fact, data from the New York, Philadelphia, Chicago and Richmond Federal Reserve regions all showed a continued deterioration during the survey period.

That said, these are all very volatile reports, but given broadly weak domestic demand in the US, the risks are tilted to the downside for the ISM manufacturing release. The employment component will also be watched carefully as a gauge for Thursday’s Non-farm Payroll report. NFPs are expected to fall negative for the sixth consecutive month, which would normally raise expectations for rate cuts by the Federal Reserve. However, with the FOMC actually expected to raise interest rates by September, futures may simply move to price in no change in policy. Nevertheless, if we see that the manufacturing sector report on Thursday and other data, including NFPs, prove to be disappointing, the markets may remain wary that despite the 1.0 percent gain in Q1 GDP, the economy is in or nearing recession.