Summer doesn’t officially end until September 21. But we’re more than a week beyond Labor Day, and business is business.
And things were booming last week.
Ignore Woodward’s latest “tell-all,” that infamous anonymous op-ed, the Kavanaugh confirmation hearings, and all the other rings of the D.C. Circus.
We have more important things to consider, such as market-moving economic data and the fact that it appears this economic “recovery” is finally making its way down to Main Street…
If You Build Stuff…
The Institute for Supply Management (ISM) manufacturing index just hit a 14-year high.
Observers expected the index to dip, but it jumped from 58.1 in July to 61.3 in August.
All that shook the market a bit
Treasury yields moved sharply higher on that news last Tuesday, triggering a profitable close to one of our positions in Treasury Profits Accelerator.
That’s what we do there: capitalize on mispricing in the U.S. Treasury market. It’s actually pretty simple stuff. But it works…
The ISM’s manufacturing index is based on a survey of around 300 purchasing managers about the general direction of new orders, production, employment, inventories, and supplier deliveries.
It’s forward looking, and it gives us a comprehensive view of what’s still an important part of the U.S. economy.
New orders jumped to 65.1 from 60.2, and production moved to 63.3 from 58.5. Prices did creep lower.
But, overall, this index hasn’t printed this high since May 2004.
The bottom line is that manufacturing is moving at a fierce clip, and the market wasn’t expecting as much.
Thus, yields moved higher, bouncing from a low of 2.97% two weeks ago to 3.07% just after the ISM release.
The Bureau of Labor Statistics added a little fuel to the inflation fire on Friday morning, as it reported a 0.4% month-over-month rise in take-home pay for August.
That was only slightly above the 0.3% expectation. But, coupled with the 2.9% year-over-year gain against a 2.8% forecast, it’s just more evidence wage-growth is picking up, too.
Non-farm payrolls increased by 201,000, beating a consensus forecast of 195,000. At the same time, July’s jobs-gain estimate was adjusted lower by 10,000.
The unemployment rate remained steady at 3.9%, though observers expected it to tick down to 3.8%.
The labor force participation rate came in at 62.7%, down from 62.9% and topping a forecast of 62.8%.
The wage growth is the thing. It’s been a persistent problem for 10 years.
But, now, it’ll make it easy for the Federal Open Market Committee to boost rates later this month.
Look for Treasury yields to remain elevated.