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November 1st Global Data

11/01/2012

As the calendar flips into November, multiple global economic data reports have been released. In the wake of these better-than-expected reports, my overall expectation for the S&P 500® Index (SPX) has not changed. The SPX remains in the midst of a modest “election correction.” However, today’s excellent data should be viewed as a necessary first step to restarting 2012’s prevailing bullish trend.
 
I categorize the correction as a pause, as the current evidence does not suggest anything more concerning than a shallow decline. My expectation is that the pause will refresh; the unknown is how quickly. The morning of November 7 may contribute significantly to how quickly the pause refreshes, not based on the winner of the election, but rather based on the margin of victory.
 
Investors should also pay heed to the technical formation for the SPX, which continues to trade in pristine fashion. During the current correction, the SPX has held support at both the 100-day moving average 1398.73 and 200-day moving average 1378.38 (Figure 1.1).
 
China PMI
• October China PMI reported at 50.2, the first plus-50 reading since July’s 50.1
• New Orders reported at 50.4, the highest reading since April’s 54.5
• New Export Orders rose to 49.3 from 48.8 last month
• Output rose to 52.1, the highest reading since May’s 52.9
 
U.S. ISM Manufacturing
• October ISM Manufacturing rose to 51.7, above the forecast for 51
• The 51.7 reading is the highest since May’s 53.5
• New Orders rose to 54.2 from 52.3 last month, the highest reading since May’s 60.1
• Inventories fell to 50.0 from 50.5 last month
• The all-important New Orders-to-Inventories ratio improves once again to +4.2, reversing the negativity surrounding August’s -5.9 
 
Figure 1.1  S&P 500 (SPX) Year to Date


Source: Bloomberg

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