US stocks burst out of the gate in September, with the DJIA posting its best one-day gain since early July after a key gauge of the manufacturing sector shows surprising strength.
DJIA surges 255 (2.5%) to 10269, its biggest one-day gain percentage-wise since July 7. S&P 500 jumps 31 (3%) to 1080, Nasdaq Comp rises 63 (3%) to 2177. NYSE volume is 4.5B shares traded, not bad volume for a session a couple days ahead of Labor Day.
Stocks rose sharply early, as traders were apparently emboldened after the S&P held the 1040 level again yesterday. But the ISM reading, coming in not just better-than-expected but actually better, was like rocket fuel. September has a reputation for being a bad month for stocks, but it also often starts off well. It did today.
Now, that lede (newspaper jargon for “lead,” the top of the story, not be confused with lead, the material they used to use to fill the letter blocks when printing the paper,) I wrote is without a doubt a concise, accurate assessment of today’s session, if I do say so myself. However, I find it hard to believe this rally was built on anything more lasting that Friday’s rally, which had just about completely melted away by yesterday’s closing bell.
Briefly, let’s look at some of the news today. There was that Chinese PMI story. China’s official PMI rose to 51.7 from 51.2. That sparked the global stocks rally. Now, that’s a very minor move, one that still leaves the index too close to the 50 level for comfort in a diffusion index that measures not actual change but the rate of change.
Still, with the proverbial new money pouring into the market, that was enough to get things going. The market totally ignored a trio of private-sector takes on the jobs market, the ADP, TrimTabs and Challenger Grey reports. ADP said private-sector jobs fell 10,000, TrimTabs said it was down 65,000. The Challenger report was actually bullish, they said job cuts fell to a decade low. Still, those first two do not presage a good number Friday when the BLS reports the nonfarm payrolls. But no matter, because the ISM’s take on US manufacturing came in at 56.3, up from 55.5, when it was expected to slide to 52.
What makes it so surprising is that absolutely everybody expected it to fall, given that the regional Fed surveys have been uniformly depressing. So, is the ISM number a one-off or some counter-trend? I just don’t know yet, but I’m very suspicious of the ISM number. It just doesn’t fit in with anything else we’ve been seeing.
Lastly, we’ll leave you with this, a tidbit that John pointed out to me just now. As bad as August was for stocks, May was that much worse, with the DJIA losing better than 8%. What’d the Dow do on the first trading day in May? It rose, about 143 points. Over the next four sessions, it lost 771 points, a time frame that included the now-infamous Flash Crash.