Market Analysis

Today's market update covers yesterday and today.

Yesterday bonds began the day flat and then selling pressure set in as the Institute of Supply Management's (ISM) Manufacturing Index came in at 52.9% (vs expected 50.1%).  This was the first time in 19 months that this ISM index has come in over 50 (over 50 means that the sector is expanding rather than contracting).  In a separate report yesterday, the National Association of Realtors said that their index pending sales of existing homes rose 3.2% in July compared to June (June was an increase of 3.6% over May).  Additionally July pending sales were 13% over July 2008.  In the early afternoon yesterday the bond market took an about shift and turned for the better as the stock market once again shrugged off better than expected economic news and took a turn southward with the Dow ending the day near the 9300 mark.

In this morning's economic news, July Factory Orders came in up 1.2% which was less than the 1.5% analysts had been projecting.  Separately the Labor Department released the revisions to 2nd Qtr Productivity which showed that worker productivity was revised up to 6.6% (it was expected to be revised down to 6.1%) and unit labor costs dropped 5.9%.  In two conflicting reports, ADP reported that private sector employers cut 298,000 jobs in August, which was more than the 250,000 analysts had been expecting from the ADP report but better than the 360,000 ADP reported lost in July.  However, a similar report published by Challenger , Gray and Christmas showed only 76,456 jobs lost in August.  The Dow has remained flat today as investors digest increased productivity #s as a potential source for stronger corporate profits even if consumer demand does not pick up quickly.  Also, at this point investors may begin to hedge their bets on Friday's non farm payroll report.  If Payrolls were cut less than the projected 265,000, stocks could see a bounce back at the expense of bonds.  Overall, the bond market is up slightly this morning.