Out Fox The $treet

This actually applies to yesterday's May ISM Manufacturing report , but yesterday was such a busy day in the markets that I'm just now getting around to writing about it. The headline ISM numbers were slightly disappointing coming in at 53.5 versus the estimate around 54.8. Honestly though, the 6 month moving average is 53.6 so the report is inline with the trend. Considering all of the other negative news, this report was actually very solid. The interesting component in the report was the New Orders that jumped to 60.1 from 58.2. In March, the number was only 54.5. Somehow businesses continue to order more products when the economy is slowing. The other encouraging number is that Inventories remain too low at 46. This number has remained consistently below 50 during this slow expansion the last couple of years. Back in March, it had jumped to 50, but it has begun trailing off again. Lastly, the Employment component remained high at 56.9 which doesn't match up with...

Haven't posted much lately in the 'Future Stat of the Week' column, but that's something I plan to post on more going forward. To determine the direction of the, it's crucial to foresee where the direction of economic data is headed and whether economists have accurately updated expectations. For this week, the key economic stats are the manufacturing data of the Chicago PMI and ISM Manufacturing. Secondary are the consumer confidence reports of the Consumer Confidence Inex and the final University of Michigan Sentiment Index. While all of these numbers are expected to be lower in Sept then Aug, the Manufacturing numbers are sill relatively strong supporting a higher market. The consumer confidence indexes are expected to be lower which could provide an opportunity for an upside surprise. The stock market has been historically strong this September making an assumption of a jump in these indexes as possible. Don't see how they could drop even lower. The jobl...

What inventory build? The consistent mantra of the GDP rally in Q1 and over the last 3-4 quarter has been that inventories were being rebuilt. Now maybe a smaller decline in inventories helped GDP, the reality is that inventories have not seen but one major inventory increase in the last 2 years. Any number over 50 shows an actual increase in inventories. A lot of the focus has actually been on a higher number then the prior month such as a 45 versus a 39. * Thanks to Seekingalpha.com and Chartfacts.com for providing the ability to chart economic data now.

At least that's the number that First Trust quotes from the ISM. The ISM came in at a strong 60.4 which was barely above expectations, but its key to not get caught up in the expectations game sometimes and just absorb the numbers. A number above 60 represents exceptional growth and was last seen in 2004. It wouldn't surprise us to see this number move on into the mid-60s before peaking out. Especially with new orders rising to 65.7 signaling strong growth ahead. Read the report from First Trust for all the details. The 6% GDP growth is something that the market clearly does not have factored into estimates. Not sure I've heard any other economists forecast such high numbers.

The March ISM easily beat consensus estimates of 57 because of surging inventories. The index came in at 59.6 versus 56.5 in February. The index was at its highest level since July 2004, but the most amazing number is that for the first time in 46 months inventories were actually built. With a reading of 55.1, manufacturers finally quit the liquidation process. So not only does the economy benefit from growth but also the rebuilding of the very depleted inventory stockpiles. Remember that for all the noise about the inventory benefits to Q1 GDP that was just because the quirky nature of the report where a smaller drop is beneficial. With the employment index slipping slightly to from 56 to 55 and remaining below the overall index that should signal bullish corporate profits in Q1 and likly Q2. The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The manufacturing sector grew for the ei...

The February ISM came in at a respectable 56.5 today. This was lower then the 58.4 from January and the 57.9 expected by economists. Some suggest the weakness was due to the snow which I don't understand why the economists didn't figure that out before hand. Regardless, its still a number showing significant growth in the manufacturing sector. The impressive stat is that inventories continue to be used up coming in at 47.3 which was slightly better then the 46.5 last month but still contracting. It was the 46th consecutive month that inventories have been trimmed. Considering the overall PMI has been positive for 7 consecutive months it seems unlikely that inventories can be cut much farther. Any company able to trim now has to be seeing some impressive margins. Both Caterpillar (CAT) and Terex (TEX), discussed on Q4 earnings call about how they spent all of 2009 producing alot less then they sold. Both forecasted huge production growth as inventories have become too lean and ...

The October ISM Manufacturing report came in at a much better then expected 55.7 compared to the 53 expected and the 52.6 reported last month. It was also the highest reading since April of 2006. This report paints that manufacturing is in a strong recovery mode with orders and production at high levels. Also very surprising was the 53 reported for the employment component which was nearly 7% points above the 46 reported last month and was positive for the first time in 14 months ( CNBC reported this was the highest number in years ). If employment is turning positive in Manufacturing already then it won't be long before a turn occurs in Services as well. This makes for an interesting October jobs report to be release on Friday. Looks like the consensus is for a loss of 175K jobs with about 45K coming from Manufacturing. These expectations seem much lower then what the ISM report suggests. Although employment is a lagging indicator a better jobs report could bolster the market to n...

A huge rebound in this months ISM Manufacturing report solidifies the believe that not only has the recession ended, but that the economy will rebound in a V shaped pattern. The report came in at 48.9 which was way above the 44.8 in June and the consensus expected increase of 46.2. With new orders, production, export orders, and backlog now above 50 its only inventory levels that is keeping the report below the growth level of 50. Check out the report from First Economic Trust - Brian Westbury for more details on the V shaped recovery that almost nobody was giving a chance until just the last week. The graphs sure look like Vs to me. Those inventories will have to be restocked soon and that will really boost the economy. The imbalance of new orders at 55 and inventories at 33 can't last for much longer. The Institute for Supply Management, a trade group of purchasing executives, said Monday that its manufacturing index read 48.9, up from 44.8 in June. That's better than the 46...

ISM Factory Index today reported a slightly better then expected number of 44.8 which was the highest number since August 2008. Though it still signals contraction, a number above 41.2 has historically coincided with a growing economy. This usually occurs because the US economy has for a long time been growing services and decreasing manufacturing. Not so sure that this report actually signals growth since the service economy may not be growing, but it does bode well that the number is getting much closer to even and signs exist that the car manufacturing will start to ramp back up likely pushing this number into positive territory in the next few months. Edit 7/2: Added the graph. Gives a better picture how the economy has recovered from the Lehman collapse. Its shows how the market could easily rally to pre Lehman collapse levels around 1,200 and that a V shape recovery is more likely then most pundits suggest. Just about every economic graph shows a V shape so why would the sums not...