Federal Reserve and Institute of Supply Management

Michael Darda: The three-month average of 48.20 is the lowest seen since the Great Recession ended in July 2009, according to Market Watch. The ISM index decline into contraction territory since October is even more worrisome for investors, considering the Federal Reserve started raising interest rates in December. The Institute of Supply Management manufacturing index for January inched up to 48.2 from 48.0 in December, but remained firmly in contraction territory—below 50.0—for a fourth-straight month. Fact Set Caption outside of wrapper for normal article images Michael Darda, chief economist and market strategist at MKM Partners, said there has only been five times in history, going back to 1948, that the Fed raised short-term interest rates when the ISM index was below 50. Fact Set Caption outside of wrapper for normal article images To reach that median decline, the S&P 500 SPX, -0.04% would have to tumble another 12% from current levels. In every case, the U.S. economy was in a recession within one to five months—with a median stock market decline of about 18% after the tightening, Darda wrote in a note to clients. (news.financializer.com). As reported in the news.