OPTIONS: Expiries for Mar06 NY cut 1000ET (Source DTCC)

• The ISM manufacturing index was stronger than expected in January at 50.9 (cons 49.9) after a slightly downward revised 49.2 (initial 49.3) as the manufacturing sector continues a strong recovery seen off October lows of 46.9.
• It follows the particularly strong recovery in the regional Fed surveys that we have been flagging (see most recently here), although those gains have admittedly been particularly concentrated in the Philly survey.
• New orders led the increase on the month, increasing to 55.1 from a downward revised 52.1 (initially 52.5) for a fresh high since May 2022.
• Business export orders are lower at 52.4 but show a similar relative trajectory, rising from 50.0 for also their highest since May 2022.
• The press release on new orders: “Of the six largest manufacturing sectors, four (Petroleum & Coal Products; Machinery; Chemical Products; and Transportation Equipment) reported increased new orders. Panelists noted an improved level of demand performance, with a 2-to-1 ratio of positive comments versus those expressing concern about near-term demand, an improvement compared to December. Capital and export orders were significant contributors.”
• Imports “Imports expanded this month after contracting for seven months in a row, preceded by five consecutive months of expansion and 14 consecutive months of contraction prior to that. Imports re-entered growth as inventory constraints weaken, tariff countermeasures are put in place, a ports strike was avoided and the deliveries from the Lunar New Year season arrive at U.S. ports".
• Prices paid meanwhile were close to expectations as they increased to 54.9 (cons 54.8 with a typically small survey of just 5 responses) after an unrevised 52.5. It pokes above the 54.8 in October for the highest since May. 

Some ERU5 option flow to note in recent trade:

• ERU5 98.12/98.00/97.75 broken put ladder paper paid 0.5 on 5.5K.
• ERU5 98.125/98.25 call spread vs. 97.875/97.75 put spread paper paid 1 for the call spread on 4K.

No tangible recovery for e-minis after the cash open, with much of the tariff-inspired overnight weakness consolidated.

• Fresh selling kicks in following the ISM manufacturing survey, given the headline beat and with prices paid back into expansionary territory.
• The 3 major e-mini contracts are 1.4-2.0% lower vs. settlement, with the NASDAQ 100 the weakest and the DJIA the most resilient.
• Technically, a move through session lows in the S&P 500 contract would expose Fibonacci support at the 76.4% retracement of the Aug 5-Dec 6 bull leg (5,892.37).
• The IT, consumer discretionary and industrial sectors lead the move lower, as you would generally expect in a tariff-driven risk-off environment.
• U.S. President Trump’s tariff-centric discussions with the Canadian & Mexican administrations are set to dominate for the remainder of the day.