In what has proved to be a schizophrenic year - the market appears ready to return to hope - change we can believe in. Maybe not politically but at least economically speaking.
Today's ADP Employment report predicted that private sector job growth would actually contract by 10,000 for the month of August. Meanwhile, the manufacturing report came in at at suprise increase of 0.8 pts from the prior month. The market is rallying strongly, up 2% as of now.
Things to keep in mind -- the ADP report is often times off target when making monthly evaluations of its projections compared to the actual government employment report that is to be released Friday morning. It appears that the market is choosing to ignore the dour news of the ADP report. Hence, signs of choosing hope and bullish momentum in the face of potentially poor economic news. Remember, the stock market trades on momentum and sentiment (in the short term) just as much as it does on economic fundamentals.
Second, the market is choosing to love this manufacturing report increase in light of all the weak manufacturing data we've received over the past 4 weeks. And while the report does show growth, the more core data of the report confirms the weaker trend of recent -- reporting weakening New Orders and Unfilled Orders (we're talking same weakness as in 2009 levels).
Finally, construction spending came in worse than expected (another cut of 1%). This speaks to issues of housing and employment -- core issues to be resolved before a robust recovery may take root. This report doesn't appear to have influenced today's enthusiasm for stocks though.
Again, the market has chosen to focus on the positives in today's reports just as it probably over-focused on the negatives in previous reports. Conclusion = fundamental issues and weakness remains but so does minimal growth as well. Those stories are here to stay for awhile, and so may be this see-saw market...or is it a teeter totter market?
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