Friday, June 3, 2011

First Item of Positive U.S. Economic News in Weeks - ISM Non Manufacturing Jumps to 54.6 v 52.8

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I just tweeted that with sentiment suddenly so poorly we're going to need to see a quite horrific ISM Non Manufacturing figure to get to new lows on the day.  Instead we saw an improvement as the figure reversed the recent trend of 'below expectation' in U.S. economic data - coming in at 54.6 in May vs 52.8 in April.  (consensus 54.0)  This is the larger part of the U.S. economy vs manufacturing so it's an actual positive.  The employment subindex grew by 2.1, while prices fell by 0.5 - both positives.  New orders also up in sharp fashion.

As for the market, we are quite stretched to the downside - at S&P 1300 the index is off 3.3% since the close Tuesday and most of the technical secondary indicators have quickly reached oversold levels.  It's head spinning action as we jump from overbought to oversold within days.  The 100 day moving average remains key at 1307; bulls would definitely like to see the S&P 500 close back above that level as this is the first intraday break of this average since March - and only the second such event since September 2010.  I would be harvesting any short side gains here not pressing on the downside due to nothing else but the 'rubber band effect' - we've fallen a long way in 3 sessions and you are in danger of that cursory oversold bounce.  If  the S&P 500 fall to new lows on the day than you have to change course & re-engage on the short side.    But that's very short term - we still appear to be in a bearish condition intermediate term.



Full ISM report here.

WHAT RESPONDENTS ARE SAYING ...
  • "Business is O.K. Fuel prices and truck availability are starting to be a negative force on our supply chain." (Agriculture, Forestry, Fishing & Hunting)
  • "Business conditions are stabilized." (Health Care & Social Assistance)
  • "First and second quarters of 2011 have been up 25 percent over 2010; however, we expect a slight slowdown over the summer months." (Professional, Scientific & Technical Services)
  • "Uncertainty within commodity markets, especially fuel- and oil-based products, is putting pressure once again and forcing us to retrench as we look for stability. We expect the remainder of 2011 and at least the first two quarters of 2012 to be tumultuous." (Retail Trade)
  • "Volatile commodity prices adding stress to meat and dairy producers; increasing fuel prices are a problem for many." (Wholesale Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
MAY 2011
Non-Manufacturing Manufacturing
Index Series
Index
May
Series
Index
Apr.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
May
Series
Index
Apr.
Percent
Point
Change
NMI/PMI 54.6 52.8 +1.8 Growing Faster 18 53.5 60.4 -6.9
Business Activity/Production 53.6 53.7 -0.1 Growing Slower 22 54.0 63.8 -9.8
New Orders 56.8 52.7 +4.1 Growing Faster 22 51.0 61.7 -10.7
Employment 54.0 51.9 +2.1 Growing Faster 9 58.2 62.7 -4.5
Supplier Deliveries 54.0 53.0 +1.0 Slowing Faster 14 55.7 60.2 -4.5
Inventories 55.0 55.5 -0.5 Growing Slower 4 48.7 53.6 -4.9
Prices 69.6 70.1 -0.5 Increasing Slower 22 76.5 85.5 -9.0
Backlog of Orders 55.0 55.5 -0.5 Growing Slower 5 50.5 61.0 -10.5
New Export Orders 57.0 53.5 +3.5 Growing Faster 9 55.0 62.0 -7.0
Imports 50.5 57.0 -6.5 Growing Slower 2 54.5 55.5 -1.0
Inventory Sentiment 55.0 57.5 -2.5 Too High Slower 168 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 39.5 40.5 -1.0
* Non-Manufacturing ISM Report On Business® data

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