And Now, By Popular Demand, Why Is The Market Up?

A few factors seem to be contributing. First and foremost, everyone seems to have liked the ISM Manufacturing Index report, with its happy-fun heart-warming "every part of this report is showing positive numbers" results. That, and nobody seems to care about construction spending.

On top of that, we're starting to see signs that Egypt will not dissolve into a round of civil war and mass murder. Egyptian President[1] Hosni Mubarak announced in a speech that he will step down at the next election, which everyone (including himself) hopes will calm the civil unrest. Whether he follows through remains to be seen.[2]

A few other things. Pfizer beat expectations for revenue and, since they're both up substantially and part of the Dow, that has a positive boost on the market. UPS also beat expectations, as did Baidu. British Petroleum announced that they lost a bucket of money[3] last year, to nobody's surprise, so that didn't really hurt them at all.

[1] This is an... interesting title he has. He became President in 1981, after Egyptian President Anwar Sadat was assassinated by Egyptian army officers. President sort of implies elections. Elections are not really something President Mubarak has had to suffer through. Technically, he had to stand for election in 1987, 1993, 1999, and 2005. The first three of those, however, were handled by referendums put forward and voted on by an Egyptian parliament that is typically described as a "rubber stamp" - no other candidates need apply. The 2005 election was the first Western-style election he ever faced, where he won reelection thanks to the support of unregistered and/or dead voters. The distinction here between "President" and "brutal dictator" seems to be "does the United States see you as an ally".

[2] Pro tip: He probably won't. Unless he does so from the airport, with the nation's supply of gold bullion safely spirited away.

[3] A 190,120,055 gallon bucket, at that.

Sales And Manufacturing Data To Warm The Cold Winter Market

Well, we hope the sales and manufacturing figures will warm the market, anyway.

First, we have the ICSC-Goldman Store Sales figures, which is a "weekly measure of comparable store sales at major retail chains". It specifically focuses on general merchandise - about 10% of total retail sales - so it isn't a huge market mover. Nevertheless, it never hurts to keep an eye on even the little details. Everything adds up. For the week ending 1/29/2011, the rate of change in store sales tracked by the index increased by 20 bps, to close at a -1.0% decrease in sales. For the rolling year, store sales are up 1.6% (a decline of 120 bps from the previous week).

There's no link for the ICSC-Goldman Store Sales original data, because they want a paid subscription.

Next, we have the Redbook, which is "a weekly measure of sales at chain stores, discounters, and department stores". So it tracks slightly different things from the ICSC-Goldman Store Sales. Interestingly enough, though, it's showing similar figures as the ICSC-Goldman report: rolling year sales for the week ending 1/29 are down 50 bps to a 1.8% increase.

Again, the Redbook report wants a paid subscription. So no link.

Taken together, the two reports indicate quire strongly that retail sales are slipping. Keep an eye out for the official retail sales report when the Census Bureau releases it on February 15 - it may very well be disappointing.

Next up is the Institute for Supply Management's Manufacturing Index. In December, the overall index was at a level of 57.0%, and the consensus expectation is that it will rise to 57.5%. The actual figures, as reported on the ISM web page, are even better. The index has hit 60.8%, its highest level since May 2004 and the sixth consecutive month of month-over-month growth. Drilling in to the report:

• New Orders are up 580 bps to 67.8%. The industries reporting new orders growth are petroleum & coal products, primary metals, computer & electronic products, transportation equipment, wood products, machinery, fabricated metal products, miscellaneous manufacturing, chemical products, paper products, electrical equipment, appliances & components, and food, beverage & tobacco.
• Production is up 50 bps to 63.5%.
• Employment is up 280 bps to 61.7%
• Exports are up 750 bps to 62.0%
• Imports are up 450 bps to 55.0%

Finally, construction spending. November saw a 0.4% increase in construction spending, and the analysts are expecting that to slow to only a 0.2% increase in December (yes, there is a full month worth of lag on this lagging indicator). And what does the Census Bureau have to say about that expectation. They laugh, laugh I say, in the face of the analyst's expectations. Constructions spending actually decreased at a rate of 2.5%. Private construction sank 2.2% for the month, while public construction sank 2.8%.

In summation? Last week was all right for retail sales, although they show signs of slowing. December was good for manufacturers, terrible for construction. The Street will most likely be relatively happy with these results. Except for that part of the Street that invests in construction.

The Markets Are Happy, And "Voodoo Economics" Takes On A Whole New Meaning

The markets decided to celebrate the New Year by throwing a little rally. The Dow ended p 93.24 (0.81%), the NASDAQ was up 38.65 (1.45%) and the S&P 500 was up 14.25 (1.13%), mostly on the good ISM Manufacturing Survey numbers. There's nothing like beating expectations to prolong the Santa Claus rally.

Winifred Jiau[1] has been denied bail on the grounds that she is a flight risk. She had originally been granted bail to the tune of $250,000, but was held in prison over the weekend because the co-signer of the bond decided not to co-sign.

In "The Markets Need More Regulation" news, the Commodity Futures Trading Commission is bracing for not getting a $92 million budget hike, and not having the funds needed to actually regulate the swaps market like the Dodd-Frank Wall Street Reform and Consumer Protection Act requires. Reports of salivating investment bankers are considered spurious[2].

Marie Laveau is now the Wall Street Journal's endorsed solution to the nation's lingering unemployment problem, as revealed on December 28th in an article about how hoodoo practitioners are aiding their clients in finding work. No word on whether or not LuckyMojo.com will be going public, but 20 years ago some venture capitalist would probably have thrown a few million at it.

If you are buying gold coins, make sure there's enough gold to make it worth your money.

And finally, don't just look back on the trading activity on the Dow in 2010. Listen to it.

[1] The latest alleged inside trader to get swept up in Operation Broken Trust.

[2] Mostly because historical precedent indicates that they really weren't going to be regulated any better anyway, so why worry?

ISM! Construction Spending! Dead Birds!

We have metrics on a Monday morning! Inconceivable![1] This is not a normal thing.

And what is it we're going to have? The Institute for Supply Management's manufacturing survey for December 2010 (expected to climb 60 bps to a level of 52.2) and Construction Spending (expected to be increasing, but with the rate of increase slipping to be up only 0.1%). The ISM survey is a huge market mover, because its seen as indicating the health of the manufacturing sector. Construction spending isn't as huge, although it is still examined. Rising construction spending is seen as an indicator of economic health and stability, but it doesn't point to the same sort of economic trickle-down that you would expect from - say - new home sales. Still, the Street will be disappointed if construction spending is unexpectedly bad. Particularly if the manufacturing survey misses expectations.

How did we actually do? The ISM Manufacturing Index came in at 57.0, missing expectations (but not badly). Construction spending handily beat expectations, coming in at 0.4% increase.

Looking to the news, China[2] has committed to continue to prop up Spanish soverign debt. "China is a responsible, long-term investor in the European financial market and particularly in Spain, and we have confidence in the Spanish financial market, which has meant the acquisition of its public debt, something which we will continue to do in the future," was the statement from Chinese Vice Premier Li kequiang.

Barron's has decided to join the "well, duh" club early with a news item predicting that, when the government begins selling off the $70 billion worth of AIG stock it owns, the price per share of AIG could drop. I'm sure everyone appreciates their insightful commentary.

Bank of America is back in the news, this time paying $1.28 billion to Freddie Mac as part of an agreement to end all claims related to mortgages sold by Countrywide[3], and also plans to record a Q4 "goodwill impairment charge" of $2 billion to its home loans unit. On the plus side for BofA, these particular bad loans weren't their fault. On the minus side, I'm not sure how much good will they have left to impair.

Look for the commercial real estate market to boom, based on the fact that the Association of Foreign Investors in Real Estate found that the United States is overwhelmingly the number 1 investment choice for overseas investors. That (probably) means climbing construction spending in 2011.

Oil is up above $92 a barrel, with some investors anticipating it will get as high as $100 per barrel. Coincidentally,[4] Russian Energy Ministry data showed that Russian oil output rose 2.2% in 2010 to a record 10.145 million barrels per day.

And finally, the city of Beebe, Arkansas rang in the New Year by watching about a thousand dead red-winged blackbirds drop out of the sky. Stone dead. For no reason anyone has been able to figure out, yet. Charles Fort would be proud.

[1] "You keep using that word. I do not think it means what you think it means."

[2] Still not wanting to replace the US as the sole economic and military superpower in the world.

{3] Specifically described as mortgages sold with faulty paperwork and other problems.

[4] I think not.

ISM Manufacturing Index, Construction Spending, And Wow, Look At The Dow

Real quick here, the ISM Manufacturing Index is a survey of 300 manufacturing firms about employment, production, new orders, etc, etc, etc. Anything above 50% is considered a sign of an expanding factory sector. The Street wants to see the factory sector expand because, when you get right down to it, factories are one the sector that actually produces useful things in the economy.

October saw a 56.9%. The Street is looking for a 57% for November. Did we achieve it? Check for yourself at http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942, or read the highlights.

Overall, the index comes in at 56.6%, still growing but slower than October. The overall economy is considered to be growing, but at a slowing rate, a trend which has continued for the last 19 months. The result is mildly disappointing, but not terrible by any means.

Construction spending saw an overall increase of 0.5% from September to October, but a 10.4% decrease from October 2009 to October 2010. The Street is expecting construction spending to decrease in October, falling 0.4%. The figures are at http://www.census.gov/const/C30/totsa.pdf, and here's the highlights:

Overall construction spending increased by 0.7%, with residential construction spending leading the pack with 2.4% growth. Much better than expected.

Oh, and the Dow is up 196.75. Yee-haw?