So it’s a sleepy Tuesday, which is to be expected because God knows what went on in the Hamptons over the weekend.
But the desks better get it together quick because as you all know, this is a big month. In fact - and this is a sad state of affairs- the fate of the financial universe hangs on the Fed, the ECB, the BoE, and - forever the wildcard- the BoJ. We said it was all hands on deck over the weekend, but we’ll give them one hangover day grace period because we certainly sympathize.
Well let us give you Goldman’s take:
“ The ISM non-manufacturing index declined to 51.4 in August, a sharp pullback from 55.5 in July. For the composite index this marked the lowest level since February 2010. The composition of the report was also unfavorable: the new orders index fell to 51.4 from 60.3 previously, and the general business activity index declined to 51.8 from 59.3. The other two components of the index were mixed, with the employment index falling slightly to 50.7 from 51.4, and the supplier delivery time index edging up to 51.5 from 51.0. The weaker-than-expected non-manufacturing ISM index lowered our Current Activity Indicator (CAI) for August to +0.9% from +1.2% previously; the three-month moving average also fell to +1.7% from +1.8% befor the report.”
“2. The disappointments in the” two ISM surveys may have some bearing on the FOMC’s decision of whether to raise interest rates at its meeting later this month. We will be closely watching tonight’s remarks from San Francisco Fed President Williams to inform our views. In a speech last month, he said: “The current pace of job gains is well above what we need, which I put to be somewhere around 80,000 a month, although estimates range from 50,000 to around 100,000. So this year’s pace of 186,000 jobs a month is over twice as fast as we need to keep up with labor force growth, and, quite honestly, is unsustainable in the long run. We should expect the pace of job gains to slow, and no one should be alarmed when it does—we should only be alarmed, frankly, if we don’t see that necessary slowdown.”
Right. Another excuse not to raise rates. LIke we’ve said a number of times, it’s all about optionality. The more leeway they have Here’s Goldman’s take :
The ISM non-manufacturing index declined to 51.4 in August, a sharp pullback from 55.5 in July. For the composite index this marked the lowest level since February 2010. The composition of the report was also unfavorable: the new orders index fell to 51.4 from 60.3 previously, and the general business activity index declined to 51.8 from 59.3. The other two components of the index were mixed, with the employment index falling slightly to 50.7 from 51.4, and the supplier delivery time index edging up to 51.5 from 51.0. The weaker-than-expected non-manufacturing ISM index lowered our Current Activity Indicator (CAI) for August to +0.9% from +1.2% previously; the three-month moving average also fell to +1.7% from +1.8% before the report.
2. The disappointments in the two ISM surveys may have some bearing on the FOMC’s decision of whether to raise interest rates at its meeting later this month. We will be closely watching tonight’s remarks from San Francisco Fed President Williams to inform our views. In a speech last month, he said: “The current pace of job gains is well above what we need, which I put to be somewhere around 80,000 a month, although estimates range from 50,000 to around 100,000. So this year’s pace of 186,000 jobs a month is over twice as fast as we need to keep up with labor force growth, and, quite honestly, is unsustainable in the long run. We should expect the pace of job gains to slow, and no one should be alarmed when it does—we should only be alarmed, frankly, if we don’t see that necessary slowdown.”
Investors should consider this report as only a single factor in making their investment decisions.