DOW – 238 = 16,804
SPX – 26 = 1946
NAS – 71 = 4422
10 YR YLD – .10 = 2.40%
OIL – .43 = 90.73
GOLD + 4.30 = 1214.00
SILV + .20 = 17.28
Yesterday, we talked about third quarter results. Most of the stock indices were down in September but still slightly positive for the third quarter. Today wiped out the third quarter gains. Why? Well, that’s always fun; the headlines offer a plethora of reasons, including “global worries†or maybe it’s a “market top†or “geopolitical hotspots†or “commodity crash†or maybe it’s just the start of a “rocky Octoberâ€. I don’t claim to know why the markets dropped today, or any given day. I can read a chart, and I can identify patterns, but there are no guarantees. We follow macroeconomics and we analyze company P&Ls, but there are no guarantees. We do not get stuck in cheerleader mode like the talking heads on TV business shows, nor do we follow the perma-bears.
Markets fluctuate; to paraphrase a line from J.P. Morgan, or maybe John Rockefeller. “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.†That’s a quote from Warrant Buffet. We don’t yet know whether this is folly or a trend. We’ll just have to listen to the markets.
The Institute for Supply Management’s index of national factory activity dropped to 56.6 last month, its lowest level since June. A reading above 50 indicates expansion. The gauge of new orders fell to 60% from 66.7%, but that’s still very strong. Production edged up a tick to 64.6%, marking a four-year high. Fifteen of the 18 industries tracked by ISM reported growth in September. A similar survey put out by the private-research firm Markit was just slightly off a four year high in September.
And compared to the rest of the world, American manufacturing is red hot. The JPMorgan global manufacturing index edged down to a four-month low of 52.2% in September while the rate of expansion was the weakest since April. Growth was near-stagnant in the Eurozone and Asia, and the global index is being propped by the United States.
On Friday, we’ll get the monthly jobs report from the government. I always consider this one of the most important economic reports. The warm-up for the report comes from ADP, a private payroll processing firm. Each month they gather data and make their own estimate about the labor market. ADP is not always a good predictor of the Labor Department’s report; for example, last month ADP predicted the economy added 202,000 jobs, and the official number came in at 142,000. In defense, the government numbers for August are typically subject to upward revisions, more than other months; so after revisions, ADP’s estimate might turn out to be pretty close.
