The markets are continuing to be under pressure after yesterday’s drubbing, which was the worst decline since August 23 and wiped out all of the third quarter’s gains for the Dow and the S&P. Investors are still mulling over the ISM manufacturing numbers, which were the weakest numbers in a decade. I would go as far as to say the ISM manufacturing number will be revised higher, as a percentage is GM related noise (if strike is resolved before next survey).
October is historically a volatile month, and this year is starting out the same way. Intriguingly, according to Bespoke Investment Group, going back 100 years, when October 1 is off more than 1%, eight out of twelve times, or 75% of the time, the month of October sees an average monthly gain of 3.75%, and eleven out of twelve times the rest of the year sees a 7.22% gain.
On the jobs front, private sector non-farm payroll added 135, 000 jobs in September. August was revised lower by 38,000 to 157,000. According to Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, “The job market has shown signs of a slowdown. ” He added, “The average monthly job growth for the past three months is 145,000, down from 214,000 for the same time period last year.”
In keeping with the ISM report yesterday, Manufacturing only created 2,000 jobs. The highest expansion was seen in the Education and Healthcare sector.
Good Producing | Service Producing |
Mining -3,000 | Trade, Tran & Utility +28,000 |
Construction +9,000 | Information +5,000 |
Manufacturing +2,000 | Financial Activities +8,000 |
Professional & Business +20,000 | |
Education & Health +42,000 | |
Leisure & Hospitality +18,000 | |
| Other +5,000 |
Small businesses, a key component for job growth, was the laggard, while large companies made up for the bulk of the gains. Chief economist of Moody’s Analytics, Mark Zandi said, “Businesses have turned more cautious in their hiring. Small businesses have become especially hesitant. If businesses pull back any further, unemployment will begin to rise.”
Business Size | Change |
Small 1-49 Employees | 30,000 |
Midsize 50-499 Employees | 39,000 |
Large 500 or more Employees | 67,000 |
Tomorrow, we get the ISM Non-Manufacturing report, and on Friday, all eyes will be on the payroll report.
Portfolio Approach
Yesterday, we took profits in Materials and Industrial. Materials were the outperformers, and we are reviewing our holdings in that sector for potential additional changes. If you are not a current subscriber to our Hotline, click here to get started today.
Communication Services | Consumer Discretionary | Consumer Staples |
1 | 3 | 2 |
Energy | Financials | Healthcare |
1 | 2 | 2 |
Industrial | Materials | Real Estate |
2 | 2 | 1 |
Technology | Utilities | Cash |
3 | 0 | 1 |