Equity markets pulled back on Monday after a weaker-than-expected reading of the Chicago PMI. The Chicago PMI came in at 45.2 which is not only contractionary but a decline from the previous month versus the expected improvement. The takeaway from the data is that general business conditions in the US have entered a contraction despite what the latest GDP data indicated. This, along with the index of leading indicators, suggests a worsening economic backdrop and not one that is improving. Later this week, the market may also be impacted by the NFP report as well as another large interest rate hike from the FOMC.

The market is pricing in a near 100% chance for another 75 basis point interest rate hike on Wednesday but the news may be in the statement. After the last PCE price index reading, it looks like the FOMC will have to get more aggressive and possibly keep policy tighter for longer than has already been indicated. The good news is that the S&P 500 and Dow Jones Industrial Average have had the best October in decades. If this action continues into November it could be a November to remember.