That the August Chicago PMI dropped to 56.6, down from 58.8 in Julye, and the lowest since November 2009 is irrelevant. What is relevant is that this number beat expectations of 53.3, so the ripfest is on: after all, stocks move higher on worse than expected data, which should they not surge on a consensus beat. Remember: the QE3/career risk rally is on. Nothing else matters. Among the index components, Prices paid dropped from 71.7 to 68.6, Production declined from 64.3 to 57.8, same for New Orders, Backlogs, and Inventtories. The two components that did go up were Supplied Deliveries from 55.9 to 60.5 and Employment, up from 51.5 to 52.1. And now everyone looks to tomorrow's ISM, for which the PMI is traditionally a good proxy, with hope that the number will print above 50 despite every single regional Fed indicating a mid-40's print.
Knee jark market response:
JOE DONOHUE, MONEY MANAGER AT DIMENSION TRADING, RED BANK, NEW JERSEY:
"This is a good number, but yesterday consumer confidence was the worst in two years. I don't see any improvement. You have to take the good with the bad, but I remain in the double dip camp, I think GDP is horrendous. I don't think our growth rate isn't going to get us anywhere. The only difference lately is that the market takes bad news pretty well, which is a short-term bullish sign."