Once again, manufacturing data is looking great this time around. The national headline from the Institute for Supply Management (ISM) posted 57.8, which is the highest since August 2014, paced by strength in all key segments:
- New Orders 63.5% (+4.0%)
- Production 62.4 (+5.3%)
- Employment 57.2 (+3.7)
Wall Street was looking for a bump in the ISM number (55.2 from 54.9) in May; however, going back to the late 1980s, there has been a huge resistance between 58 through 60, so this momentum will face a major hurdle in its next release.
Sectors Reported Growth (15 out of 18):
- Furniture & Related Products
- Nonmetallic Mineral Products
- Paper Products
- Machinery
- Electrical Equipment
- Appliances & Components
- Chemical Products
- Transportation Equipment
- Computer & Electronic Products
- Food, Beverage & Tobacco Product
- Plastics & Rubber Products
- Printing & Related Support Activities
- Fabricated Metal Products
- Wood Products
- Petroleum & Coal Products
Monthly Reported Contraction in June (3 sectors out of 18):
- Apparel, Leather & Allied Products
- Textile Mills
- Primary Metals
This news helped the Dow Jones Industrial Average to an intra-day all-time high that rallied to 21,562 before cooling off into the last hour of trading on Monday. The S&P 500 surged on the half-day session as well, but NASDAQ couldn’t hold onto gains as the rotation theme reemerged in the final hour of trading.
There is another rotation theme of investors pumping billions into Exchange-Traded Funds (ETFs) while pulling billions out of mutual funds. The good news is that this probably means stronger hands and mitigates volatility, but most of the inflow is earmarked for international fixed income, domestic fixed income, and international equities.
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| Domestic Flow Trends | Equity Mutual Funds | Exchanged Trading Funds |
| June 21 | -$3.5 | -$4.4 |
| June 14 | -$2.4 | +$22.0 |
| June 7 | -$7.7 | -$3.4 |
| May 31 | -$3.2 | +$11.7 |
| May 24 | -$2.3 | -$3.2 |
Source: ICI
Key Parameters
| S&P 500 Index | +0.23% |
| Consumer Discretionary (XLY) | -0.10% |
| Consumer Staples (XLP) | -0.13% |
| Energy (XLE) | +1.93% |
| Financials (XLF) | +1.46% |
| Health Care (XLV) | +0.19% |
| Industrials (XLI) | +0.62% |
| Materials (XLB) | +0.84% |
| Real Estate (XLRE) | +0.93% |
| Technology (XLK) | -0.71% |
| Utilities (XLU) | -0.46% |
For the S&P Tech Index (XLK), the 50-day moving average didn’t hold on Monday; and now, important support points include 54.00 -52.00 and the 200-day moving average of 51.40. Conversely, the S&P Energy sector (XLE) was the best performer and closed at the top of the trading channel with a 50-day moving average.
The market is on the cusp of a breakaway rally, although tech is clearly the anchor for the moment. I think it’s still a part of a great consolidation phase.
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