Well, February came and went, and the month ended up a winner. It is hard to imagine it could have ended differently with all the solid economic data for the month. However, as the Ides of March approach, one must take care. If you don’t believe me, just ask Julius Caesar. Oh wait, you can’t; the man is dead, murdered by members of his own Senate. Et tu Brute? Sorry, I couldn’t resist …
The U.S. manufacturing sector grew at its fastest rate in nearly seven years in February … The Institute for Supply Management [ISM] said its index of national factory activity rose to 61.4 in February from 60.8 in January, topping forecasts for 61.0. It was the highest level since May 2004. The Chicago PMI for February climbed to a 20-year high of 71.2. It had been expected to come in at 67.5 after a 68.8 reading in January.
It appears the U.S. economy is gaining steam, but as I alluded to above, the market does not seem to care (watch out). As I am writing this, the market is dropping hard, potentially headed for a triple-digit loss today on the DIJA. This downward pressure flies in the face of improving economic data here in the U.S. (increased consumer spending, improved confidence, rising employment, rising profits, manufacturing on the move, etc.) and across the globe …
… euro zone manufacturing grew at its fastest in nearly 10 years, surveys showed on Tuesday. British manufacturing also grew strongly, at its fastest pace in nearly two decades, and Indian factory growth accelerated.
It’s the oil, stupid, to paraphrase a political slogan. Well, yesterday, Libya turned the spigot back on and shipped one million barrels of oil to China. It announced it would start shipping 650,000 barrels per day, minimum. Saudi Arabia has increased supply to make up for any loss from Libya. I pointed out the glut of oil in Cushing OK and the need there to build more storage capacity. Maybe it is Oman, the country with control over the Straits of Hormuz, the passage Iran uses to ship its oil. The again, maybe it is Iran itself …
Oil prices climbed Tuesday as Iran clamped down on anti-government protesters and unrest in the Middle East threatened to keep energy prices high for months to come.
Well, the market might believe oil is on the rise for good, as positive economic data and Middle East events mean more pressure on the supply of oil. Then again, maybe the big boys are simply taking profit after such a solid February. Actually, who knows, really? It is so difficult to divine the mind of the market. My guess is that it is a little bit of everything, which just about right for a market that has run up so far so fast. Define the pullback as you will, but keep in mind the reason really does not matter. Historically speaking, this about as normal as it gets in market cycles. On the upside of the market cycle, the market rises, falls back a bit, and then rises again. If you want confirmation of what the market is doing, take a look at the S&P 500 chart from August to today. Yeh, this is about as normal as it gets.
Trade in the day – Invest in your life
