No surprise in today's most important economic report: just as we predicted [6]first thing this morning, "In keeping with the tradition of Baffle with BS, we expect the ISM to come in well above expectations to offset the major Chicago PMI disappointment." Just as expected, the headline June ISM just printed at 50.9 [7], a beat of expectations of 50.5, and up from May's 49. And just to make sure everyone is completely baffled with unbelievable BS, while the New Orders number rose from 48.8 to 51.9, and Production (+4.8), Prices (+3), Inventories (+1.5), and Deliveries (+1.3), all rose, it was the time of Employment Index to drop from 50.1 to 48.7: the first sub-50 print since September 2009. In other words, just as every week/strong economic report is offset by a matchin strong/weak economic report a few days later, expect this Friday's NFP to come in blistering and to deny the ISM weak jobs number especially since Goldman is now warning of a "disappointment" to consensus (and with that put the Taper tantrum back front and center).
From the ISM's Holcombe: "The PMI™ registered 50.9 percent, an increase of 1.9 percentage points from May's reading of 49 percent, indicating expansion in the manufacturing sector for the fifth time in the first six months of 2013. The New Orders Index increased in June by 3.1 percentage points to 51.9 percent, and the Production Index increased by 4.8 percentage points to 53.4 percent. The Employment Index registered 48.7 percent, a decrease of 1.4 percentage points compared to May's reading of 50.1 percent. Manufacturing employment contracted for the first time since September 2009, when the index registered 47.8 percent. The Prices Index registered 52.5 percent, increasing 3 percentage points from May, indicating that overall raw materials prices increased from last month. Comments from the panel generally indicate slow growth and improving business conditions."
The breakdown:
[8]
Visually, the headline print:
[9]
And just the employment index:
[10]
From the respondents:
- "Business remains good to improving." (Miscellaneous Manufacturing)
- "Industry volumes picking up with improved housing starts." (Electrical Equipment, Appliances & Components)
- "Indications are that customers have acceptable inventory levels, and as a result, are backing down on new orders and reassessing market conditions." (Wood Products)
- "Last couple of weeks a little slower." (Furniture & Related Products)
- "Seeing signs of life through summer retail [sales] promotions — still an overall soft market." (Food, Beverage & Tobacco Products)
- "Business is steady. Qualified CNC machinists are hard to find." (Fabricated Metal Products)
- "Weather conditions are causing uncertainty in agricultural markets." (Machinery)
- "Continued slow improvements." (Transportation Equipment)
- "June sales appear to have rebounded from what was a lackluster May." (Paper Products)
- "Slow growth continues to choke the recovery. We are not out of the woods yet by any stretch of the imagination." (Chemical Products)
And the breakdown of commodities up and down in price:
Commodities Up in Price
- Aluminum Products; Caustic Soda (3); Corrugated Boxes (11); Corrugated Packaging (2); Lumber (6); Plastic Products; Plywood; and Polypropylene*.
Commodities Down in Price
- Butter; Hydraulic Components; Polypropylene (2)*; Stainless Steel (2); Steel (3); Steel — Cold Rolled; Steel — Hot Rolled (2); and Sugar (2).
As a result, algos are buying stocks head over fist, because algos are buying stocks head over fist.