Dow stocks were up, up, up (when was the last time we saw 200-point curbs in on the upside?) after the National Association of Purchasing Management (NAPM) said its index of industrial activity soared last month as factories upped production and lowered inventories amid gasp! new orders. And suddenly it seemed that the bears had been barbecued right out of existence.
"The recovery starts right here," gushed Ian Shepherdson, chief U.S. economist at High Frequency Economics, to CNNfn, and who knows, he might just be right. Stock-watching cynics still want those rich folks to dump equities en masse in a vale of tears it’s called capitulation before they turn bullish, and Lord knows they’ve been the smart ones for the better part of a year now.
But purer-minded economy-watchers, upon hearing a pulse in that most comatose of sectors, manufacturing, seem to have a somewhat legitimate reason to smile. For if the manufacturing recession is indeed coming to an end after more than a year of falling commodities prices and 800,000-odd layoffs, can the end of the larger economy’s near-recession be far behind?
TSTW could count the ways, from Argentina to Zurich, from anemia in the eurozone to the fall of the house of the Rising Sun, that there might still be a bear out there. But merely coming back to work from a three-day weekend is depressing enough we’ll wait for the economic reports of fall to tell that tale. And at least the investors seem so happy to be back.
The big numbers for the rest of the week could either confirm or deny Tuesday’s newfound economic euphoria. Wednesday brings the revised productivity number for the second quarter survey says a slight retreat from the former 2.5 percent to 2.0 percent. Being that we’re in the middle of a business-cycle inflection when layoffs and production cuts race each other to the ground, you may infer absolutely nothing of the New Economy’s long-term prospects from this news. Thursday brings up-to-the-minute unemployment-claims numbers for the last week of August, and a services report from today’s heroes at NAPM.
Friday is the barrage. The lead is August’s unemployment number, expected to come in at an upticked 4.6 percent. Economic types will remember that unemployment always rises coming out of a slowdown as well as into a recession, so even an unpleasant surprise like 4.7 or 4.8 doesn’t mean anything bad, necessarily. Unless consumers think it does. Other consumer numbers are folded into the report, namely average workweek and hourly earnings, and those’ll be the garnishes. And then there’s wholesale inventories for July normally one to watch very closely, since those shelves have got to get emptied before the new day can dawn. But Tuesday’s NAPM report was for August, and that good news should trump anything disheartening from two months ago.
In other words, this might finally be the week to bet on some kind of sustained rally, to imagine that Tuesday’s run-up won’t be brought crashing down at least by anything on the economic tea leaf front.
And then again, those rich guys didn’t get rich by hanging onto run-up stocks in a market that likely still has some ballast to dump before it can genuinely find the slipstream.