The volatile week ended with modest losses in most indexes with the Nasdaq squeaking out a slight gain.
Markets declined on Tuesday and Wednesday following weak Institute for Supply Management (ISM) purchasing managers index (PMI) for manufacturing. The ISM manufacturing PMI went further into contraction Tuesday and sparked a two day selloff. Thursday’s non-manufacturing PMI showed growth at a smaller pace.
We think it is important to keep these numbers in perspective. First, the ISM PMI number was affected by the General Motors strike which by months end was also affecting many supplier companies. A resolution to the strike should cause a rebound in manufacturing. Second, while the ISM number is the most widely followed, there is a second set of PMI numbers issued by IHS Markit. There are significant differences between these two PMI indices. While ISM surveys 300 corporations, IHS Markit surveys 600. Also, ISM equal weights the different industries and IHS weights the industries based on size. Therefore, the numbers can be quite different with IHS Markit showing a still accelerating economy. When we get a resolution to the GM strike, hopefully before long, we likely will see a rebound in manufacturing and the associated services.
A goldilocks jobs number on Friday (not too hot and not too weak) was strong enough to encourage traders that the U.S. is likely to still grow but weak enough to support further FED rate cuts.
Crude oil prices fell and gold prices rose for the week. The dollar fell against a basket of currencies and the 10-year Treasury yield fell to 1.53%
In economic numbers this week:
- In China, the private Caixin/IHS Markit PMI numbers showing acceleration:
- Manufacturing rose from 50.4 in August to 51.4 in September
- Non-Manufacturing fell from 53.8 to 53.7
- The World Trade Organization forecast goods flow to slow to 1.2% growth this year, down from 3.0% last year. If this comes to pass, this will be the slowest growth since 2009.
- The Institute for Supply Management reported:
- U.S. Manufacturing PMI fell from 49.1 to 47.8.
- U.S. Service PMI fell from 56.4 in August to 52.6 in September.
- IHS Markit reported different U.S. PMI numbers
- U.S. Manufacturing PMI rose from 50.3 in August to 51.1 in September.
- U.S. Services (non-manufacturing) rose from 50.9 in September up from 50.7 in August.
- IHS Markit reported for the composite PMI (manufacturing and services) from the Eurozone fell from 51.9 in August to 50.1 in September.
- The Labor Department reported:
- First time claims for unemployment rose 4,000 to a seasonally adjusted 219,000. The four week moving average of claims was unchanged at a seasonally adjusted 212,500.
- The U.S. added 136,000 non-farm jobs in September. The unemployment rate fell to 3.5% in September from 3.7% in August.
- The EIA weekly oil report is here wpsrsummary (6). Also, the EIA reported in the past week:
- Field production of crude oil fell from 12.5MM barrels per day to 12.4MM barrels per day.
- Natural gas storage increased by 112BN cubic feet and is at the five year average at this time of year.
- Baker Hughes reported the number of active oil rigs fell 3 to 710 and the number of active gas rigs fell 2 to 146.
Please call us if you have any questions.
Loren C. Rex, CFP®, AIF®, MA Erik A Smith
President Managing Partner
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. The Indices mentioned are unmanaged and cannot be invested into directly.