Sunday, November 11, 2012

Manufacturing Data Lifts Stocks

The market is getting August off to a very good start. After Friday’s lousy GDP report, I wasn’t exactly looking forward to today’s ISM number. Fortunately, the index came in at 55.5, which is a decent number. The Street was expecting 54.2.

If you’re not familiar with the ISM, it’s the Institute for Supply Management index that comes out at the beginning of each month. It’s one of the best measurements for how well the economy is doing. If the number is above 50, then the economy is growing. Below 50, it’s not. Today’s report is the 12th straight month of 50+ reports. What I like about the ISM is that it comes out early and that it’s not revised endlessly like GDP data.

Are we heading for a double-dip? It’s hard to say. For now, I would say that the odds are low but they’re increasing. The problem is that the outlook for the future is cloudy, even more so than usual. What concerns me most is that the GDP numbers are very poor. Businesses have been growing earnings by growing their margins. That’s nice to see, but at some point you need to see growing sales as well.

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