ISM shows surge in prices and weaker manufacturing activity. (0:15) AbbVie gets into weight-loss game. (2:16) Close, but no cigar for Philip Morris? (3:24)Show NotesGoldman's cheap healthcare picksKroger CEO out for personal conductDomino's joins the stuffed crust sceneEpisode transcripts: seekingalpha.com/wsb Sign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Full Episode
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Monday, March 3rd, and I'm your host, Kim Kahn. Our top story so far, the stagflation specter is spooking traders today, wiping out the risk-on move that was booing stocks and weighing on bonds following the weekend surge in crypto.
The February ISM manufacturing index brought with it a, quote, whiff of stagflation risk, economist Mohamed El-Aryan said. It fell more than expected to 50.3 from 50.9 in January. That's barely an expansion territory and lower than the 50.6 forecast. New orders fell to 48.6 from 55.1, and the employment component dropped to 47.6 from 50.3.
At the same time, the prices paid component surged to 62.4 from 54.9. That's the highest level since 2022, and raises questions about the potential for the increased production costs to be passed through to the consumers in the form of higher prices," Hilarion said.
Wells Fargo economists noted that the headline index only avoided falling into contraction territory due to wait time as supplier deliveries shot up to 54.5. This was the broadest indication of wait time since the supply chain disruption year of 2022, they said.
Longer wait times for supplier deliveries are additive because in normal times, such a development is associated with a factory sector that cannot keep up with demand. Since that is not an accurate characterization of what is contributing to wait times today, the expansionary signal from the ISM should, for this month at least, be taken with a massive grain of salt.
Pantheon macroeconomist Oliver Allen says, Some of the earlier increase in the ISM manufacturing index from October to January reflected manufacturers hurrying to complete orders before tariffs are applied, a rush that now seems to be petering out.
The simultaneous market upturn in several measures of investment plans was a positive sign, but intentions seem to be flagging again now in the face of greater uncertainty around trade policy, the Doge cost-cutting drive, and European demand for military hardware. We see the manufacturing sector continuing broadly to stagnate over the next few quarters.
The report erased opening equity gains, and the major averages are now all in the red. The 10-year Treasury yield is back to December lows, below 4.2%. Among active stocks, AbbVie has entered into a licensed deal with Danish biotech Goobra AS to develop Goobra's experimental obesity treatment.
Under the terms of the agreement, AbbVie will lead development and commercialization activities of GUB 014295 globally. The partnership marks AbbVie's first foray into the obesity field. Kroger announced that chairman and CEO Rodney McMullen has resigned from the company following a board investigation of his personal conduct that was inconsistent with the company's policy on business ethics.
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