U.S. Manufacturing Expands for Third Straight Month. Caution Is Still Warranted.

U.S. manufacturing expanded for a third consecutive month in March, with the ISM PMI at 52.7 versus a 52 consensus—an encouraging sign for growth but one accompanied by emerging headwinds. New orders remain positive at 53.5 (down from 55.8), employment slipped to 48.7 indicating job cuts, and the Prices Index jumped to 78.3 (from 70.5), with broad commodity cost increases tied to tariffs and Middle East conflict. Markets showed a sector response: the industrial XLI ETF rose about 1.9% in early trading and is up ~25% over the past year, helped by aerospace/defense and AI data-center-related stocks. Overall, the report supports risk assets modestly but highlights inflationary pressure and geopolitical risks that warrant caution for the S&P 500 and broader market.