In August, the US ISM manufacturing index came in at 48.7. This is lower than the expected 49.0 but higher than July’s 48.0. Key points include: – **Prices Paid**: 63.7, which is below the anticipated 65.3 and last month’s 64.8. – **Employment**: 43.8, compared to the expected 44.5 and July’s 43.4. – **New Orders**: Increased to 51.4 from 47.1 last month. – **Imports**: Decreased to 46.0 from 47.6. – **Production**: Dropped to 47.8 from 51.4. Tariffs are impacting various industries, raising costs for some products like organic cane sugar. Construction is struggling with low activity impacting new sales, while trucking and transportation are significantly down. Despite these challenges, the increase in new orders hints at potential recovery, which has sparked some buying interest in U.S. stock markets. The latest ISM data presents a mixed picture. While manufacturing is still contracting at 48.7, the rise in new orders to 51.4 suggests it might be leveling off. This uncertainty is likely to keep market volatility high in the coming weeks. This report adds complexity to the Federal Reserve’s upcoming decisions ahead of their September meeting. The Consumer Price Index (CPI) reading from July 2025 remains stubbornly at 3.5%, and job growth in August’s non-farm payrolls slowed to just 150,000. The Fed is trying to balance fighting inflation against a weakening economy. We saw similar data confusion in late 2023, which caused erratic market movements. Given this situation, we are considering options strategies that take advantage of market hesitation. The VIX, sitting around 19, appears undervalued given the current risks, making long volatility positions appealing as we await the next inflation report. The weak data in trucking and transport suggests bearish positions on transportation ETFs, which have already dropped over 8% since July 2025. Protective puts on major indices like the S&P 500 can act as a safeguard against the risk of weak production and employment indicating a deeper economic slowdown. The current dip buying in the market might be short-lived if follow-up data doesn’t confirm the strength of new orders. We also need to keep an eye on the 2-year Treasury yield, as its movements will indicate how the market feels about future Fed policy.

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