Several weeks of gains and continued talk of recovery have helped to take the market to fresh highs this month. Enthusiasm seemed to trump fundamentals though, and it appeared as though investors have still been casting a wary eye towards each new economic report, looking for a cue to turn the tide. The market may have been probing recent mid-month highs, but after today’s Chicago PMI report, things quickly lost steam. Ahead of the end-of-week employment report, strength may be fading.
Hopes had pointed towards a higher start as the revised GDP data pointed towards a smaller than anticipated loss. At 0.7 percent drop versus the 1.0 percent1 expected may have buoyed some enthusiasm despite the weak ADP private payroll numbers. However, this data was quickly overshadowed by the dismal Chicago PMI coming in at 46.1 compared to expectations it would gain ground to hit 52. This reading comes as a blow to those who were expecting manufacturing to continue to improve. Instead, this data points to the possibility for continued weak demand – not a good economic sign.
The official employment numbers may underscore this perceived weakness. Today’s Automatic Data Processing showed job losses may be slowing, but they are still happening. Insecurity or any continuing pressure for consumers facing job loss, under-employment or housing crises will continue to erode the path to recovery. The Briefing.com forecast for Friday’s numbers points to an estimate for 180,000 jobs lost and a 9.8 percent unemployment rate. Any significant deviation from that number either way may signal the next direction.
The overall impression is one of some investors taking off positions ahead of the next curve in the road. This kind of safety maneuver may not be a bad one in light of the simplest of observations; the market is hardly likely to move in a straight line and recovery will most often be a process.
1 http://www.businessweek.com/investor/content/sep2009/pi20090930_781898.htm
Past Performance is Not Indicative of Future Results.
Past Performance is Not Indicative of Future Results.
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