ISM manufacturing index plunged 5.7 points to 50.5%, barely holding above the boom-bust line. The third strike against stocks was the injury from a 2.2% drop in construction spending, led lower by commercial real estate, and insult from a deep downward revision of the May report to -2.0% from -0.7%.
The revisionism creeping into U.S. accounts, following evaporating GDP growth, Chicago PMI and consumer confidence this week was felt especially keenly by the front-end. Within 24-hours, 2-year yields plunged 29 basis points to 2.11% and the 2-year note and 30-year bond spread vaulted 11 basis points to +317 basis points. The September bond lagged, but closed up 10/32 at 106-09.
The dollar was trampled and its trade-weighted index fell back below 107 as its coupling with reestablished with down-trodden stocks. The recent corrective narrowing of swap spreads was also arrested, as were WorldCom execs.