Even Will Smith was impressively surprised by all the manufacturing going on last month
Dow: 13,515 (+0.58%) S&P 500: 1,444 (+0.27%)
Wheaties. Red Bull. Wheaties with Red Bull. We assume your fridge is prepped with enough go-to energy breakfasts for 5 days of big US econ reports. The beginning of a new month features some key economic news, mainly Friday’s official government employment report for September. After the past 2 slow weeks were limited to a series of US housing data and fading hopes of a Kstew/RPatz make-up in the headlines, we’re ready for some market-moving action. And today the Commerce Department reported that spending on construction projects dipped for the 2nd straight month, but investors were focused on the surprisingly solid ISM manufacturing survey. Good weekend news concerning Spanish banks helped the Dow finished up 78 points to start the 4th quarter of the year.
ISM Manufacturing Index rises for 1st time since June
After contracting for 3 straight months, the ISM “Manufacturing Survey”climbed much more than expected in September, from 49.6 on their index to 51.5. The Institute for Supply Management surveys 300 manufacturing companies on a variety of issues (fun stuff like new orders, inventories and employment) and quantifies the data in an index form. A reading of >50 indicates manufacturing growth while outcomes <50 indicate contraction. The key to success in September was an increase in labor thanks to more hiring, outweighing the low-level of orders the past few months. Stocks immediately jumped on the surprisingly good news in the day’s biggest econ report because investors viewed it as a signal of modest growth.
European Markets lift on Spain’s better-than-expected “stress test” results
American stock markets were down 4 out of 5 days last week, but we jumped into the weekend with some TGIF optimism. We learned from the Spanish “stress tests” that their morbid banking sector would only need a €60 billion bailout instead of the oft-mentioned €100 billion estimate. Investors’ excitement was probably more a case of “TG” we’re not Europe. The stress tests were hypothetical worst case scenarios to determine how much capital the banks would need to survive worst-case market scenarios. After losing billions on defaulted real estate assets that have plummeted in value for years, it was determined that the banking sector had a €60 billion shortfall. Unlike other Eurozone bailouts, Spain’s is going directly to the banks…for now…and Spain’s bailout check would cost Europe less than expected caused investor sentiment to rise across Europe, and European markets soared today, since it was their first chance to digest Friday’s news. The bullishness wafted across the ocean like a fine Bordeaux red and was a factor in Wall Street’s gains today.
Tomorrow:
- Detroit used to produce an ungodly number of automobiles – now they’re known for producing white rappers (Eminem, Kid Rock, etc). But the critical American auto industry reports September vehicle sales tomorrow.
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