Stocks Retreat On Weak Jan. U.S. ISM Number — 51.3
U.S. manufacturing grew at a substantially lower pace, as new order growth plunged by the most in 33yrs., driving overall factory to an eight-month low — come in at just 51.3. Expectations were for something in the 55-56 range. This comes after a December ISM number of 56.5. The three major U.S. indices immediately sold off this morning into the triple digits. The biggest flag in this morning’s ISM data was the huge drop in forward-looking new orders index, which fell to 51.2 from 64.4 in December.
The poor U.S. ISM number follows in the aftermath of a stunningly bad U.S. Durable Goods number for December of -4.3%. Expectations were for a +1.8%. And, the number of net new jobs created in the U.S. in December was a paltry 74K — expectations were for something north of 200K.
This poor data sets up Friday’s Non-Farm Payroll report at 0830 as a very key and market moving number. Forecasts for Friday’s number is 183K and unemployment to climb from 6.6% to 6.7%.
Granted, the weather hasn’t been conducive for great economic numbers, but, this trifecta of poor data is weighing on equities. It was also recently reported that some 400 small, medium and large businesses across the U.S. have either been reducing hours for employees to under 30hrs. a week and/or, reducing personnel in order to stay below the key 50-employee threshold where Obamacare regulations kick in.
Another stunningly weak Non Farm number on Friday could really rock this market. I will look to buy selectively today on weakness.
Outside the U.S. Emerging Markets have been hit hard. The Japanese Nikkei has led the retreat overseas, down 10.3% in the past month. Russia is down 9.8%, Brazil -8.2%, China -4%, and India -3.1% — all in the past 31 days.
If the Friday Non Farm Report is much weaker than expected, there will be rumblings that the Fed might pause in its QE tapering strategy. On the other hand, if we get something in the 200k or better category, we’ll likely see a rally on Friday. Till then, we look to be in full correction mode and represents – IMO – a good time to buy shares of those companies that you have been waiting to buy at a better price.
The real question is, has anything fundamentally changed? How you see it, depends on where you sit. I just don’t have a strong feel one way or the other; and, I suspect there is a good bit of uncertainty out there in trader land. Uncertainty usually breeds more selling. V/R, RCP www.fortunascorner.