ISM Misses Big

Somehow or another, our earlier joke that the ISM should beat the highest Wall Street estimate quickly became the whisper number, which was to be expected in the aftermath of yesterday's comparable Chicago PMI action. Which is why when the final ISM came at a whopping miss of 52.5, on consensus of 54.5, and down from 54.1, the market was less than happy. It gets worse: while the bulk of major ISM index components dropped in February, with PMI, New Orders, Production, Employment and Deliveries all down (Inventories unch), it was the scariest component that posted a major jump as Prices soared +6 to 61.5, the highest since June. And with Exports and Imports both improving, this proves that already in February rising gasoline prices started impairing US manufacturing. But don't tell that to the cheerleaders: because who was in the top spot of Wall Street "forecasters" if not Joe LaVorgna with his estimate of 56.0 for the ISM. Regardless, expect market sentiment to immediately shift to one that despite what Bernanke said less than 24 hours ago, this miss is an immediate green light for QE3 and the market should close at or near 14,000. Unless, of course, the vacuum tubes realize the minor detail that when David Tepper went "Balls to the Wall" and both bad news and good news meant stock upside, WTI was $85. It is $108 and rising now.

ISM breakdown:

As usual, the heatmap following dunce brigade:

And the survey respondents:

  • "Business is holding steady. Concern over commodity prices ongoing." (Chemical Products)
  • "Still somewhat cautious about recovery. Expecting a good year, but not seeing orders yet." (Machinery)
  • "Demand remains consistent to strong on all levels." (Paper Products)
  • "Demand from auto makers is getting stronger." (Fabricated Metal Products)
  • "Manufacturing is busy. Spending money on new equipment to accommodate customer demands. Material prices are staying in check." (Food, Beverage & Tobacco Products)
  • "There seems to be a much more positive outlook for the economy. Customers are ordering material for stock rather than just working hand-to-mouth." (Fabricated Metal Products)
  • "Global GDP softening and beginning to impact the demand chain." (Computer & Electronic Products)
  • "Production is busy — several new large projects." (Primary Metals)
  • "Customers [are] lowering inventory levels, anticipating price decrease due to third-party published reports on materials." (Plastics & Metal Products)
  • "We are optimistic about the U.S. market this year, a little hesitant about what may happen in Europe and unsure about China." (Transportation Equipment)
  • "Shipments are increasing over last year. Waiting to see if the trend continues." (Wood Products)