Strongest ISM in Two Years

Most of Wall Street seems to be focused on the state of Georgia today and its two Senate races. These may decide who controls power on Capitol Hill.

After a rough trading day yesterday, the stock market is making back some of those losses today. So far, cyclical stocks and small-caps look strong. Value is outpacing growth. Energy stocks are exceptionally strong today.

This morning’s ISM Manufacturing report looked pretty good. It came in at 60.7 which is the best number since August 2018.

The ISM’s index of national factory activity rebounded to a reading of 60.7 last month. That was the highest level since August 2018 and followed a reading of 57.5 in November. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index would slip to 56.6 in December.

But some of the surprise rebound in the ISM index was due to an increase in the survey’s measure of supplier deliveries to a reading of 67.6 last month from 61.7 in November.

A lengthening in suppliers’ delivery times is normally associated with a strong economy and increased customer demand, which would be a positive contribution. But in this case slower supplier deliveries also indicate supply shortages related to the pandemic.

This is jobs week. Tomorrow, we’ll get the ADP private payroll report. Then on Thursday, another jobless claims report. On Friday, the big December jobs report comes out. I suspect that this may be a weak report.

Posted by on January 5th, 2021 at 1:17 pm


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