Aryanews- The U.S. manufacturing sector is expected to have expanded in March for an eighth straight month, and the vast services sector likely also grew, suggesting ongoing improvement in the U.S. economy.
The median Reuters forecast for the Institute for Supply Management's manufacturing index is 57.0, while the median forecast for the non-manufacturing ISM is 53.5.
A reading above 50 indicates the economy is expanding while a reading below that indicates contraction.
The manufacturing sector has been growing steadily since August, 2009, though momentum did slow slightly in February, when the index came in at 56.5. A steady improvement was expected for March, partly due to more clement weather.
"Factory activity in February was disrupted by the mid-month snowstorms, something that was largely absent in March," said Steven Wood, chief economist at Insight Economics in Danville, California. "This allowed new orders, production, and vendor performance to improve."
The services sector, which accounts for the majority of U.S. employment, has been slower to move back into expansionary territory, the result of a weak labor market that has caused consumers to be a bit more cautious with their credit cards.
The highest forecast for manufacturing ISM was 59.0 and the lowest was 54.0 among the 63 analysts polled. For the services ISM, the highest forecast was 55.0 and the lowest was 51.0.
FACTORS TO WATCH
Investors will likely focus on the employment component of the two indexes as they try to assess the strength of underlying employment trends ahead of March's payrolls report due out at the end of the week.
Payroll data due Friday is expected to show employers hired 190,000 workers in March after cutting 36,000 in February.
MARKET REACTION
Investors are keen to see more evidence that the economic recovery is gaining momentum to justify the optimism that has sent U.S. stocks to 18 month highs.
A more upbeat reading on the ISM manufacturing and services data should provide fresh impetus for the run-up that now has the Dow Jones industrial average <.DJI> knocking on 11,000 -- a level it last surpass in September 2008.
Strong readings would likely add to the bond market's woes, however, and could put more upward pressure on Treasury yields. The 10-year benchmark yield hit 3.928 percent last week, its highest level in more than nine months.
Bond holders worry that quicker economic expansion could start to push up prices and erode the value of their holdings.
The U.S. dollar has trended higher against the euro recently as investors worry about high government debt levels in the euro zone. Stronger-than-expected ISM readings could bolster that trend.