We have two important readings out this morning, after the key unemployment report from earlier. We have seen the University of Michigan consumer sentiment reading. This report was immediately followed by the ISM Manufacturing Index and by construction spending.
ISM Manufacturing rose much more than expected in January, up to 53.1, versus the Bloomberg consensus reading of 50.7. This also topped all economists as the Bloomberg range was 49.3 to 52.0. The prior month’s reading was only 50.7. The Institute for Supply Management surveys more than 300 manufacturing firms for this report, and a figure above 50.0 represents growth. The prices paid rose to 56.5, the employment reading rose to 54.0, new orders rose to 53.3, production rose to 53.6 and inventories rose a whopping eight points to 51.0.
Note that the Reuters/University of Michigan report offers a revised number from the preliminary reading two weeks ago. Sentiment in the month of January was reported as 73.8, versus the preliminary reading of 71.5. Bloomberg had a consensus estimate of only 71.5. Due to this being a study from only 500 households initially, we generally do not give this index as much weight as the actual consumer confidence reading from the Conference Board. Investors and traders still react to this reading. The current index was up at 85, but the expectations component was all the way down at 66.6. That implies that those surveyed are not as optimistic for the forward months as things are right now.
Construction spending is a reading for December, so it was the least current of the major reports today. This rose by 0.9% rather than the 0.8% expected by Bloomberg.
These reports are overshadowing by a jobs report that looks more in-line than the headline unemployment reading might have indicated. Keep in mind that the billions and billions of dollars flowing into stocks is a huge tailwind and support mechanism. If you don’t believe it just look at the tape. The DJIA is up 135 points at 13,995 and we briefly hit DJIA 14,000.