ISM Helps U.S. Stocks Rally Before April 2012 Employment Report:
The stock market reached new highs today as the Dow jumped to a levels not seen in 4 years. The Institute for Supply Management factory index shows manufacturing grew in April 2012 with a reading of 54.8 from March’s reading of 53.4. Any reading above 50 suggests economic expansion and stocks rallied right after the news was released at 10.00 EST. This is the fastest growth in the ISM index since June 2011.
Will Any April 2012 Number be “Good”?
European markets were closed today in celebration of May Day 2012 so reaction from today’s news will be important tomorrow. We believe the economic data has been mixed and not mixed-positive. Any unemployment number this Friday for non-farm payrolls is likely to disappoint if it doesn’t beat the average forecast by at least 100,000. The margin of error for monthly unemployment reports is high so we believe Friday’s number could come in at 150,000 +-65,000. Any number within this range could be considered lackluster and below recent trends which could cause the probability the Fed will ease further to increase. This would be bullish for U.S. equities short term.
Eight European countries are now in recession, -that’s eight more than when QE2 began. This also increases the likelihood the Fed will move before June’s employment number is released.