Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Just about any economic news that does not indicate a steep slowdown is going to be good enough in the current environment. ISM Non Manufacturing came in today at 53.7 just above the 53.5 of April and better than expectations. The secondary indicators are mixed with new orders looking good but employment looking bad. Prices decreased substantially – good for more Fed easing. As always this report, while getting far less attention than ISM Manufacturing, represents far more of the U.S. economy.
As for the market the S&P 500 is coming up to test its 200 day moving average from below. The sectors running today are those which have been obliterated in the last swoon this past week – financials, housing, and commodities – especially oil. Many stocks in these sectors were extremely oversold with RSI’s (Relative Strength) below 30 and below their lower Bollinber Band. So those would be ‘dead cat bounce-ish’ types. This drop over the past week has been so quick, a lot of charts are extremely oversold even as the index is not necessarily so – hence even a bear would want to see these names bounce to provide more attractive entry points.
Full report here.
“The NMI registered 53.7 percent in May, 0.2 percentage point higher than the 53.5 percent registered in April. This indicates continued growth this month at a slightly faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 55.6 percent, which is 1 percentage point higher than the 54.6 percent reported in April, reflecting growth for the 34th consecutive month. The New Orders Index increased by 2 percentage points to 55.5 percent, and the Employment Index decreased by 3.4 percentage points to 50.8 percent, indicating continued growth in employment at a slower rate. The Prices Index decreased 3.8 percentage points to 49.8 percent, indicating lower month-over-month prices for the first time since July 2009. According to the NMI, 13 non-manufacturing industries reported growth in May. The majority of the respondents’ comments are positive and optimistic about business conditions and the direction of the economy.”
WHAT RESPONDENTS ARE SAYING …
- “Q2 will be a strong quarter for us; the building market is starting to wake up.” (Construction)
- “Increased activity and resources related to projects.” (Finance & Insurance)
- “The upswing in consumer confidence has led to increased business.” (Arts, Entertainment & Recreation)
- “While we tend to remain optimistic about the economy, our numbers do not show a surge in activity. It appears consumers are maintaining their ‘let’s wait and see’ attitude.” (Accommodation & Food Services)
- “Business outlook is flat for the remainder of 2012 with emphasis on cost containment, restructuring and cost-savings projects.” (Professional, Scientific & Technical Services)
- “Business is still strong, but we have seen some softening in growth since mid-March.” (Wholesale Trade)
| ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS* MAY 2012 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Non-Manufacturing | Manufacturing | ||||||||
| Index | Series Index May | Series Index Apr | Percent Point Change | Direction | Rate of Change | Trend** (Months) | Series Index May | Series Index Apr | Percent Point Change |
| NMI/PMI | 53.7 | 53.5 | +0.2 | Growing | Faster | 29 | 53.5 | 54.8 | -1.3 |
| Business Activity/Production | 55.6 | 54.6 | +1.0 | Growing | Faster | 34 | 55.6 | 61.0 | -5.4 |
| New Orders | 55.5 | 53.5 | +2.0 | Growing | Faster | 34 | 60.1 | 58.2 | +1.9 |
| Employment | 50.8 | 54.2 | -3.4 | Growing | Slower | 5 | 56.9 | 57.3 | -0.4 |
| Supplier Deliveries | 53.0 | 51.5 | +1.5 | Slowing | Faster | 2 | 48.7 | 49.2 | -0.5 |
| Inventories | 56.0 | 54.0 | +2.0 | Growing | Faster | 4 | 46.0 | 48.5 | -2.5 |
| Prices | 49.8 | 53.6 | -3.8 | Decreasing | From Increasing | 1 | 47.5 | 61.0 | -13.5 |
| Backlog of Orders | 53.0 | 53.0 | 0.0 | Growing | Same | 2 | 47.0 | 49.5 | -2.5 |
| New Export Orders | 53.0 | 58.0 | -5.0 | Growing | Slower | 10 | 53.5 | 59.0 | -5.5 |
| Imports | 53.0 | 56.5 | -3.5 | Growing | Slower | 6 | 53.5 | 53.5 | 0.0 |
| Inventory Sentiment | 63.0 | 61.0 | +2.0 | Too High | Faster | 180 | N/A | N/A | N/A |
| Customers’ Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 43.5 | 45.5 | -2.0 |
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
