ISM BLOWS PAST EXPECTATIONS…
It looks like those regional manufacturing surveys were giving off some false warnings after all. This morning’s ISM Manufacturing Survey came in at 54.8, above expectations of 53. Overall, the report was generally positive with solid improvement in new orders, employment and production. Here’s what ISM had to say about this month’s report:
“Economic activity in the manufacturing sector expanded in April for the 33rd consecutive month, and the overall economygrew for the 35th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. “The PMI registered 54.8 percent, an increase of 1.4 percentage points from March’s reading of 53.4 percent, indicating expansion in the manufacturing sector for the 33rd consecutive month. Sixteen of the 18 industries reflected overall growth in April, and the New Orders, Production and Employment Indexes all increased, indicating growth at faster rates than in March. The Prices Index for raw materials remained at 61 percent in April, the same rate as reported in March. Comments from the panel generally indicate stable to strong demand, with some concerns cited over increasing oil prices and European stability.”
You can read the full report here.
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
Follow Me:
22 Comments
The NDGP guys have it wrong…… targeting 2% inflation is way to aggressive. The Fed needs to pursue a mild (slow) deflationary policy in order to bring down the cost of manufacturing, compete with China and increase wages via prices for the consumer. The US was on a way too aggressive inflation path.
To be fair, we had readings of 60+ this time last year (if I’m not mistaken) and May-July appears to be seasonally strong for the ISM. We’re in the peculiar paradigm of rally on a beat (=increased earnings) and rally on bad news (=QE). No reason to ever fight Mr. Market – but the underlier (the economy), even on leading indicators seems less buoyant than the market. Either we see housing data (particularly constructions & new home sales) tick higher – or, we’re in for a significant correction once we sober up. Markets are always interesting – but, this phase on the face of it looks quite challenging.
@ Delta Financials
“We’re in the peculiar paradigm of rally on a beat (=increased earnings) and rally on bad news (=QE). No reason to ever fight Mr. Market – but the underlier (the economy”
When the market goes up on good news, goes up on bad their is nothing peculiar about it. Rather if I was a doctor and Mr.Market came to me seeking a diagnosis based on that behavior alone…well that’s easy. What do you think that is symptomatic of?
The 3 best days are the first 3 of the month. Let’s see how Fridays unemployment report on the 4th day of Sell in May works.
We just got some crazy numbers for the iSPX today. 1, 3, 6, 12 months out. It’s not even funny. Makes me wonder why having a PhD from Stanford is relevant. Being smart just costs you money.
“We just got some crazy numbers for the iSPX today. 1, 3, 6, 12 months out. It’s not even funny. Makes me wonder why having a PhD from Stanford is relevant. Being smart just costs you money.”
Where did you get them?
@ BJM
Look at what the iSPX does after a print on the ISM like today. I’ll give you a hint.
Look at the new high and the > %.
@VII, are the crazy numbers you refer to, 1,3, 6, 12 months out, are they projections of SPX going up toward 1600? It seems to me you are more of a cautious and worried bull, unlike B Ferro who seems like he’s 100% invested what he views as a secular bull market from now into 2014.
To me, the key question is: will the upside economic surprises outweigh the likely negative surprises that may be coming from Europe and China. I’m holding at 23% equities, 60% bonds mostly DBLTX.
@ Larry
The diffuclut thing for me is this market is like PAT from the SNL Skit. Everytime I get a piece which shows the iSPX is about to RIP something happens and the bear case starts to get built. I guess this is what trading ranges do until they break out or break down.
I did not add iSPX today. But as you know…I’ve been making money. I own DBLFX and LQD..doing great. I own REITS..dowing great..etc. I don’t have to get everything right. I have some tight stops and waiting to get longer or pull them.
Every chart I’ve gotten is either right at resistance or right at support. Something has got to give. I’ll probably miss the first big move up…but I’m more concerned with that small exit door and 1.7 trillion trying to leave at once.
I don’t really know about Europe….just confirmed my plans to head to Ireland, London, and Paris from July 1- July 14th. If anyone reads this from Europe and you want to have a drink while I’m their with my family(scared to death to fly with my 14 month son.)..hit me up and I’ll forward you my e-mail.
But I do own Asia(10%).
Yes..I’m fairly neutral here given I just can’t figure out if it’s a man or women. It really is like PAT
@VII – Thanks. I feel pretty much the same as you. Market is like PAT, ha, ha.
This view here makes some sense to me:
http://seekingalpha.com/article/543271-equities-yellow-flag-waved-high?source=email_macro_view&ifp=0
Still hanging in with 23% in equities, plus 4% in REITS.
My gut feel is that Friday is the day market will breakout in one direction or the other.
Looking at the breakup – the surge in exports is encouraging and the fact that China official PMI was also a beat suggests that we’re getting a dose of genuine trade re-balancing, which is very, very significant.
Congratulations to the Fed. They have managed to inflate another bubble …
secular BULL market….
SPX 1800-1900 by summer 2014.
Will continue to pound the table on this…
It would be the first time in history where we get a secular bull market this early in a de-leveraging cycle…
Given that ALL the recent market rallies have been fueled by “print-”, ahem, “stimulative” operations, a bull market will mean we have gone the way of Zimbabwe.
To date NO ECONOMY HAS EVER GROWN OUT OF EXCESS DEBT organically, i.e. not without some prolonged pain of sorts (raging inflation, prolonged unemployment, etc …)
Here’s what’s more relevant, Andrea, relative to your economic arguments…
And I will capitalize to emphasize just like you…
DATING BACK TO THE 1900S IN SECULAR BEARS THE MARKET HAS STAGED 2 CONSECUTIVE UP YEARS 10 DIFFERENT TIMES. IN ONLY ONE INSTANCE DID IT STAGE A 3RD CONSECUTIVE UP YEAR, THAT BEING 70, 71 AND 72. WE BOTH KNOW WHAT HAPPENED THEREAFTER: -17% IN 73 AND -28% IN 74; THE PEAK IN 73 CAME JAN 13TH, VERY EARLY IN THE YEAR.
WITH THIS IN MIND, WITH 2011, THE MARKET MANAGED A 3 CONSECUTIVE UP YEAR. THEREFORE, LOGIC SUGGESTS IF THIS WERE A SECULAR BEAR IT SHOULD PROBABLY FOLLOW THE PATH OF 73, 74 IN 12 AND 13. UNFORTUNATELY, HERE WE ARE NEARLY HALF WAY THROUGH THE YEAR AND THE MARKET IS UP 10+ FREAKING %…
THE TRAIN OF LOGIC SUGGESTS ONE THING IF WE END UP FOR A 4TH STRAIGHT YEAR – WE ARE NOT IN A SECULAR BEAR.
@BFerro, DANG, those caps of yours make your post hard to read! must be my calcifying visual cortex…
Hmm, well, I’ll take Andrea’s side of this B Ferro, tho’ i always highly respect your opinion, and I love VII’s PAT analogy, lol.
I don’t think the coming currency crisis in the eurozone will be sidestepped by the markets as you seem to think it will. (My inference) or the other inference i could draw is that you think Eurozone can hold it together for another couple of years. I don’t think Greece and Spain populations will support their current gov’ts that long, thus to me, leading to a currency crisis, which will pull down the markets. I like Martin’s (Macroeconomics) postings on the eurozone credit situation a great deal.
Your assumption, based on historical data, is that the world markets will operate the same as they have historically, but i’m not sure this can be assumed with the change in globalization and centralization. We’ll see.
I’ve also watched you, as a trader, change your stance very rapidly and profitably, like when you were sold on the Bernanke Put never failing, yet changing your strategy last summer as his Put came into question. I’ll be interested to follow your commentaries into the summer and see if you still feel we are going up.
best!
rhp
Yea RHP, I’ll probably be wrong and you’ll probably be right (along with Andrea) on the whole secular bear vs. bull debate…
And if we see SPX 1000 before 1500 or 1800 I will stand atop the figurative PragCap commentary mountain and scream loud and clear, “I was wrong!!”.
That said, I’m quite all right with being wrong and will be wrong a million more times before it’s all said and done.
However, my aim is always to have reversed my position to profit from the other side of the debate, whether it be bull or bear, by the time I’ve realized my thinking is out of line…
In the end we all can be wrong or right over and over, however, that doesn’t necessarily preclude us from still making money when we’re wrong and losing it when we’re right.
@Andrea, you said: “To date NO ECONOMY HAS EVER GROWN OUT OF EXCESS DEBT organically, i.e. not without some prolonged pain of sorts (raging inflation, prolonged unemployment, etc …)”.
Actually, the USA had HUGE gov’t debt at the end World War II in 1945, and we grew our way out of it with relatively little pain. Those debts still exist, we merely rolled it over by selling new gov bonds to replace it. It just became a much smaller percent of GDP due to our fast growth in 20 yrs after WWII.
That is not entirely true, but this is part of a bigger discussion. Also, at that time only the federal debt was very large …
And I wonder how does this reconcile with the other news posted just one day ago on this same site:
“MANUFACTURING INDICES TURN SHARPLY LOWER”
I am surprised not to see an article on here about Jeff Saut’s latest recommendation. I have been following his comments here for two years and he has been right on the money ( even when I disagreed with him on the macro environment). Jeff has become much more cautious recently.
Billw
Yeah…If you had to pick one guy in the wall st draft…. Saut is probably Andrew luck. I like that guy.
I knew you’d come around.
Now, just for fun, go do a long chart on RJF vs “Wall St” peers like UBS, JPM, BAC, C, MS, et al.
@B Ferro
MSCI World was negative in 2011 (but is now higher than its peak in 2011)