Markets felt all at once tense and disinterested following what it was fair to call a stagflationary read on the US economy.

Although anecdotes from respondents to America’s marquee manufacturing survey didn’t suggest an outright recession is imminent, silver linings were hard to come by in this week’s sole top-tier data release out of the US.

Factory activity is contracting and raw materials prices are increasing for the first time in five months, which may presage a renewed bout of goods inflation. You can say a lot about all of that, and none of what you might say is auspicious.

It might be incorrect to describe ISM manufacturing as the only top-tier data release this week. ISM services actually carries more weight in the current environment, but historically, investors have treated the manufacturing gauge as a reliable indicator of economic vitality — or the opposite.

Full disclosure: I’m not fan of the chart above. It’s apples to oranges, but I do use it occasionally. It’s decorative. Like a sconce. Or a stack of books you haven’t read, but figure you can fool people with if you dog-ear a few pages and arrange them in a haphazard way on a coffee table.

Stocks weren’t amused with the unfavorable juxtapositions contained within the ISM details, but as discussed here on Tuesday, this is a placeholder week. It’s next week that counts+.

“The nascent re-risking seen across January’s spot equities rally necessitated a (sadly temporary) resumption of hedging demand [but] that’s now looking long gone as skew again flattens and the duration of hedges shortens into the 0DTE spectrum, all against the current lack of macro catalysts until the March 10 NFP print,” Nomura’s Charlie McElligott said Wednesday, adding that the attractiveness of riskless USD cash proxies and short-term (i.e., low duration risk) IG credit is making the proverbial “sidelines” look compelling, “particularly as equities yo-yo and range-trade from mechanical flows out of systematics and options-linked hedging.”

Rates were a little more interesting Wednesday following ISM and comments from Raphael Bostic, who said the economy is strong enough to withstand tighter policy. “You might infer… that we at the Fed view a major economic disruption as a precondition to ending our policy tightening,” Bostic wrote, in an essay posted to the Atlanta Fed’s website. “Nothing could be further from the truth. In fact, I continue to believe that the economy packs sufficient momentum to weather higher interest rates.” To which markets responded: “Heard!” Pricing for the terminal rate moved up near 5.5% and traders are now looking out to September for the peak.

10-year yields kissed 4%, but the 2s10s is struggling to re-steepen. The bear flattener is the default on days when the data suggests the Fed’s work is far from done. That’s intuitive, but I still wonder if the long-end is insufficiently attentive to what the balance of the data is saying about the economy — it’s possible that secular stagnation is dead and buried.

Neel Kashkari, meanwhile, suggested he’s open to a 50bps re-escalation at this month’s policy meeting, even as he emphasized that “what we signal in the dot plot [is] much more important.” So, again, it’s all about “how high” and “how long,” not about “how fast.”

It’s worth noting that 10s have now retraced the entirety of the rally sparked by the cooler-than-expected October CPI report which sent bullish shockwaves across markets in early November.

“At the risk of redundancy, the importance of 4% was put on display Wednesday in the 10-year sector as the follow through price action in the wake of ISM manufacturing saw a concerted effort to press the selloff until buying interest returned to bring rates off the peaks,” BMO’s Ben Jeffery and Ian Lyngen remarked, after noting that coming into the year, their contention was that it “remained too soon to begin looking for the cyclical bull steepening of the curve.”

It’s frankly difficult to know what to make of various inversions at this point. “The move over the past several weeks and Wednesday’s deeper inversion back to within striking distance of fresh cycle flats leaves -91.9bps the only level to overcome before more negative territory [for the 2s10s],” Jeffery and Lyngen added.

Coming back to stocks, they’re ambivalent. Sure, equities noticed Wednesday’s rates selloff, but took it largely in stride. Stock bulls would obviously rather yields move down, but equities will do whatever they’re inclined to do during any given session. Trying to explain why is often a fruitless endeavor.

With rates moving up and profits falling, “you’d think investors would be more concerned about credit risk,” SocGen’s Andrew Lapthorne said. “But markets seem to be largely ignoring the consequences of much higher interest rates and rapidly evaporating excess profitability.”