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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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    Nov 1, 2013 2:07 PM

    By Carlos Guillen

    Equity markets have been trading rather erratic so far during this after-Halloween trading session even as more manufacturing data landed better than expected.

    Perhaps the only and most important fundamental bit of economic data out today was the Institute for Supply Management (ISM) Purchasing Managers' index (PMI), considered by many to be a very important health indicator of the manufacturing industry here at home. PMI in October clocked in at 56.4 percent, increasing from the 56.2 percent reported for September and landing above the 55.0 percent consensus estimate; the result represented the fifth consecutive month of increases and was at its highest level for the year. Despite the fears that the government shutdown would wreak havoc on the economy, the results for October are not quite reflecting this yet. New business is booming from a textile perspective and the Telecom market is said to be spiking. Of the 18 manufacturing industries, 14 reported growth in October. Given that a reading below 50 percent indicates the manufacturing economy is generally contracting, this PMI result puts the U.S. manufacturing sector into its fifth month of growth after landing in contraction territory back in May. Also encouraging was that, given that a PMI over 42.2 percent, over a period of time, generally indicates overall economic expansion, the result also indicates the 53nd consecutive month of overall economy growth. Concurrently, New Orders totaled 60.6 percent, up from the 60.5 percent posted for the prior month.

    (click to enlarge)

    This good ISM economic data builds on yesterday's economic data from Chicago PMI, which spiked in October to 65.9 from the 55.7 reported in the prior month. The result was better than Economists' forecast of 55.0 and continued to indicate that the Chicago area was still in expansion mode.

    Perhaps a bit negative for stocks today were comments from Philadelphia Fed President Charles Plosser, an opponent of the Fed's quantitative easing actions, as he conveyed that he was growing more worried about the eventual exit from the Fed's bond-buying program. On the other hand St. Louis Fed President James Bullard, a supporter of the asset-purchase program, commented that the central bank may have to accept the market's view that any tapering of its bond buying is closely tied to expectations of the first rate hike. This may hint is that if the Fed does indeed begin to tapper it would have to do so with increases to the Fed funds rate as well.

    So, despite the markets fluctuations today, stocks are modestly in winning territory, as reflected by the Dow Jones Industrial Average, which is up over 20 points at the moment.


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