Flash! Dow looses 800 points in 2 Days

Here we go again, more selling based on market news items reported without contextual backup.

Purchasing Manager’s Index (PMI) for September Worst in a Decade

50.2% was the expected reading. 47.8% was the actual number. Any reading below 50 is considered to be indicative of a slowing economy. PMI is a snapshot of purchasing manager’s intentions to buy … their optimism pessimism at a moment in time:

“A key feature of the PMI surveys is that they ask only for factual information. They are not surveys of opinions, intentions or expectations and the data therefore represent the closest one can get to “hard data” without asking for actual figures from companies.^[17(Wikipedia)

What might have caused this surprising dip in the index? My guess is the auto strike which broke out mid September. Not only did the strike cause the auto manufacturers stop ordering parts but all of their suppliers also went off line.  Remember, in the quote above … the purchasing  plans that are measured by the PMI index are meant to be immediate hard data (a snapshot). No wonder we saw a bad number. 

Part 2 of the rout has to do with the ADP payroll employment numbers

We covered this back in June with “Beware the June Jobs Report–a counterpoint.”

My conclusion was that as we had moved closer to full employment (unemployment is  currently, as it was then, 3.7%) it would be harder to add jobs. It is harder to find good people to higher as the pool of quality workers is diminished. Those people are just not available. Jobs grew 135,000. The did not decline. The estimate was growth of 152,000. Again, the estimate was missed. Yet the total number of new jobs did increase in what should be a more difficult time to grow jobs.

Bottom line: Given little perspective, neither one of these numbers should be terribly worrisome. The computers and skittish investors may be giving us another chance to buy low.

What do you think?