At the commencement of this shortened trading week, the market is already off to a good start. In particular, emerging markets rallied for a fifth straight session as China prepares to cut interest rates again and loosen lending restrictions. Here in the US, the rally continued again for the major indices, albeit not as robust. Oil prices are holding steady at $76 per barrel, however prices have the potential to drop to around $60 per barrel if the Organization of Petroleum Exporting Countries (OPEC) doesn’t agree to cut production by at least one million barrels per day. The major leaders of OPEC will be meeting in Vienna this week to discuss what action, if any, will be taken. Economic data released this morning was relatively mixed, even as the headline numbers appeared to indicate an overall negative outlook.

During the month of October, the Chicago Fed’s National Activity Index showed a slowdown in both production and employment, as well as weakness in consumption and housing. The index came in at a reading of 0.14 which was lower than a downwardly-revised 0.29 reading in September. This drop also contributed to a drop in the 3-month rolling average to -0.01 from a revised 0.12 in September. This negative reading means that economic growth, going into this month, was trending no better than at its historic average. The production component is primarily responsible for the weakness in October at -0.01 from +0.18 in the month before. This is tied to a sharp decline in both mining and utility output in the industrial production report. Employment fell to +0.16 from +0.22 in the month before, as nonfarm payroll growth decelerated to 214,000 from 256,000 in September. On the positive side, contributions from sales/orders/inventories and consumption & housing improved slightly though they were pulled down by weakness in housing starts.

The US service sector is having a bit of a rough month according to the research firm, Markit, whose flash reading for the non-manufacturing purchasing managers’ index (PMI) reported a further loss from the recovery peak in June. The flash reading for the Markit services PMI is at 56.3 in November versus a final reading of 57.1 in October. Growth in the incoming work component, now at a 7-month low, is the main reason for the slowdown. Yet despite the deceleration in incoming work, backlog accumulation remains strong and is boosting employment growth to a 5-month high. Business outlook is another component also at a 5-month high. One reason for the gain in confidence is a moderation in input costs due to declining oil prices. However, price traction for output not likely positive as this reading is at its lowest point since July. While Markit isn’t the primary indicator of health in the PMI readings, if this reading is accurate it could point to a slowdown in the fourth quarter GDP readings.

While the Philly Fed indicated a massive jump in production during the month of November, activity in the Dallas Fed district increased slightly according to the monthly Texas Manufacturing Outlook Survey. The production index, which is a key measure of all the manufacturing conditions in the state, fell from 13.7 in October to 6.0 in November. Other measures of current manufacturing activity slowed during the month, such as capacity utilization, which fell from an index reading of 18.1 in October to 9.8 in November. New orders also declined notably from 14.2 to 5.6; however over a quarter of firms surveyed continued to note increasing new orders relative to October levels. Business conditions seem to be positive for the month, but outlooks were not as optimistic. The overall general business activity index came in at a solid reading of 10.5 – the same reading as the month before. Corporate outlook declined from 18.2 to 8.8, due to a smaller share of firms noting an improved outlook in November than in October. The employment index posted a sixth robust reading, coming in at 9.6 as labor market indicators noted continued employment growth and longer workweeks. Of the firms surveyed, 21% reported net hiring, compared with 11% reporting net layoffs. Overall though, expectations regarding future business conditions remained optimistic in November. The index of future general business activity rose 5 points to 18.3, while the index of future company outlook was unchanged from the month before at 23.1. All in all, manufacturing in Texas is only slightly better than expectations indicated.