Despite all of the rumblings from various corners of global financial markets in recent days and weeks, this chart perhaps best captures the mood in the market right now.
The Citi Economic Surprise Index tracks how economic data come in relative to consensus Wall Street estimates — so when it’s going up, economic data are beating Wall Street forecasts, and when it’s going down, data are missing forecasts.
The index peaked on January 15 at 72.7, its highest level since February 2012. By the end of last week, it had fallen to 49, and today, following a much weaker-than-expected ISM manufacturing release, it now stands at 32.6.
The resurgence in economic data improvements relative to forecasts since November has been a big driver of positive sentiment in the marketplace lately. However, January marked a sharp departure from this atmosphere as the economic data got worse, stocks fell, and Treasuries rallied.
Today is the first trading day of February, and it looks like the negative momentum is building — the economic surprise index has taken another big leg down this morning, stocks are falling sharply, and Treasuries are enjoying a strong lift.
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