What a day, with so many heavy hitting data points reaching the wire. The headliner is the Federal Reserve's FOMC Monetary Policy Statement, scheduled for 2:15 PM EDT release. The market is desperately hopeful the brainiacs in DC will design some sort of new economic catalyst. Anything less than that, including any new quantitative easing, and I would look for a short burst higher at best for stocks. Otherwise, the market will accept a new normal, which is of an impotent Fed. The market was looking higher in the early going, with the SPDR S&P 500 (SPY) up a half point into midday.
The second most important report on the day, in my view, is the ISM Manufacturing Index. Last month, this index went underwater, indicating contraction in the manufacturing sector. We penned our article, "The Report that Changed Everything," in response. This month, it inched higher, but remained in territory indicating contraction at 49.8. Economists were looking toward an improvement, with the consensus forecast set above water, at 50.1, versus the 49.7 mark set in June. Since ISM, we've seen regional index after regional index deteriorate, showing signs of recession. Thus, this report was closely watched today and will continue to weigh on the market. No pun intended, Markit also posted its PMI Manufacturing Index at 9:00 AM, and it deteriorated to a mark of 51.4 for July, down from 52.5 in June.
ADP's Private Employment Report reached the wire this morning. The report for July showed ADP's estimate for a private nonfarm payroll increase of 163K, which was higher than the economists' consensus forecast for 120K. The problem is, there's good enough reason to question ADP data after past performances, and with two days to the big government report, it's worth the capital to wait. Last month's report showed ADP's estimate for private employment growth was off a bit. The company estimated private employment increased by 176K in June, but the Employment Situation Report showed private employment actually rose by 84,000.
Motor vehicle makers Ford (F), General Motors (GM) and others are reporting their sales for July today. Domestic vehicle sales are expected to again post growth, with the annual pace of sales seen rising to 11.0 million, up from 10.8 million in June. However, total vehicle sales are expected to decrease to a pace of 14.0 million, from 14.1 million in June.
Chrysler, which is largely owned by Fiat SpA (FIATY.PK), posted a 13% increase in auto sales in July. It was the company's best July in five years, continuing a similar trend of outperformance, but sales growth missed estimates by Barclays (BCS) and RBS (RBS) analysts. GM (-6.4%) and Ford (-3.8%) saw their sales decline in July.
The Mortgage Bankers Association (MBA) reports its Weekly Applications Survey every Wednesday morning. Despite record low rates, though, increases in mortgage applications tied to the purchases of homes have not shown life. This morning, the MBA's Market Composite Index edged higher 0.2%, as the Purchase Index declined 2.0% and refinance index gained 0.8%. Interest rates were mixed among loan balances, but the Refinance Index reached a three-year high. While we are on real estate, Construction Spending will be reported at 10:00 AM. Economists see spending increasing 0.5%, after it rose 0.9% in May. Even while home prices were recently reported increased, housing stocks collapsed Tuesday. However, we believe while housing stocks may not be appealing in this environment, it is time to buy real estate.
EIA's Weekly Petroleum Status Report was released at 10:30 AM. The report covering the period ending July 27 showed crude oil inventories decreased by 6.5 million barrels, but stayed above the upper limit of the average range for this time of year. Total motor gasoline stocks decreased by 2.2 million barrels, and remained in the lower half of the average range for this time of year.
The very busy corporate earnings schedule for Wednesday has reports coming from Alamo Group (ALG), Allergan (AGN), Amdocs (DOX), Amerigroup (AGP), ArthroCare (ARTC), Automatic Data Processing (ADP), Avis Budget Group (CAR), Avon Products (AVP), BOK Financial (BOKF), Booz Allen Hamilton (BAH), Box Ships (TEU), Burger King (BKW), Cal Dive (DVR), Comcast (CMSCA), DaVita (DVA), Devon Energy (DVN), Diana Containerships (DCIX), Dollar Thrifty (DTG), Dominion Resources (D), El Paso Electric (EE), Energizer (ENR), First Solar (FSLR), FTI Consulting (FCN), Garmin (GRMN), Genco Shipping (GNK), Green Mountain Coffee (GMCR), Harley-Davidson (HOG), Hillenbrand (HI), Hospira (HSP), Huntsman (HUN), Hyatt Hotels (H), Intercontinental Exchange (ICE), Intrepid Potash (IPI), Jamba (JMBA), Johnson Outdoors (JOUT), LeapFrog (LF), MAKO Surgical (MAKO), Marathon Oil (MRO), MasterCard (MA), Metlife (MET), Murphy Oil (MUR), Onyx Pharmaceuticals (ONXX), Overseas Shipholding (OSG), Owens Corning (OC), Prudential Financial (PRU), R.R. Donnelley (RRD), Radian Group (RDN), Speedway Motorsports (TRK), Sturm Ruger (RGR), Tesoro (TSO), Tetra Tech (TTEK), The Boston Beer Co. (SAM), The Hanover Insurance (THG), The Hartford Financial (HIG), Time Warner (TWX), Transocean (RIG), Unum Group (UNM), Vonage (VG), Weight Watchers (WTW), Williams Cos. (WMB), Yelp (YELP) and more.
It will definitely be a wacky Wednesday with so many market drivers at play.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.