If there was one thing the market did not nead 24 hours ahead of the FOMC in the aftermath of the better than expected Case Shiller May print (yes, 2 months ago) it was a follow up beat by the Chicago PMI, as this would only make any further forceful QE tomorrow less than likely. Sure enough, this is just what happened, as the PMI printed better than expected rising from June's 33 month low, printing at 53.7 from 52.9 in June on expectations of a modest decline to 52.5. And so in a market in which everything continues to be driven by hope and prayer that Bernanke will wake up at just the right angle, Risk is once again suddenly OFF. If there was one saving grace it is that the Seasonally adjusted Employment index plunged from 60.4 to 53.3 (60.0 to 57.0 NSA) which is the lowest print since July 2011 which in turn brings it back to May 2010. This leaves hope that the NFP print on Friday will come negative. However, that will be too late for the August FOMC meeting. Oh well, there is always hope that in September the Fed's mind will change as long as some more horrible economic data comes between now and then.
And the employment subindex:
As usual, the best source of information comes from the survey which presented a far less optimistic picture than the headline number:
- Number of new orders remains erratic. This month very good previous 3 not so good. Quote activity remains high.
- Compared to the last two years, business is down. This year, though my gut is telling me business is softening, our overall business remains at a steady pace.
- Business is getting extremely quiet! Summer vacations? Election year? EURO crisis? I wish we knew.
- Foreclosures continuing unabated. Residential and Commercial mortgage borrowers still under economic pressure.
- Our orders are steady, but no large spikes, July will be a little slower which it usually is for our business, June was very good.
- A few of the chemicals we purchase are increasing. Longer term contracting has helped to keep costs of Ethanol and Ethylene Glycol low. Recent dip in oil has helped other costs. Business is a bit soft right now.
- Economic growth is still very slow.
- All of our major suppliers are busy. Lead times have dropped but only slightly.
- Weather impacting crops. Global economical issues still a threat to prices.