Overseas news that Italy was willing to reduce its budget deficit after 2020 helped propel the Dow Jones Industrial Average into record territory on the open.   The Dow opened higher by 125 points and was further boosted higher after the release of the ISM report.

ISM Services Index

The Institute of Supply Management released its September survey of non-manufacturing firms.  The survey of executives at service-based companies rose to 61.6 from 58.5 in August. This was one the highest level ever, dating back to the index’s inception in 2008.  All 17 industries tracked reported growth in September.  An increase in new orders saw employers hiring more workers.   

• The New Orders Index rose to 61.6% from 60.4%
• The Employment Index increased to 62.4% from 56.7%
• The Business Activity Index increased to 65.2% from 60.7%

A respondent commented, ““Overall positive outlook in the economy continues, but we are cautious due to limitations in available manpower.”  Labor continues to remain a concern as employers continue adding to their work forces.   

ADP

ADP and Moody’s Analytics reported that private companies added 230,000 positions to their payrolls in September.  This was better than expectations of 185,000 and August was revised to 168,000 jobs.

• Goods-producing jobs +46,000
• Construction +34,000
• Natural resources & mining +5,000
• Manufacturing +7,000

Gains were wide-spread across industries. 

• Service-providing +184,000
• Professional/business services +70,000
• Education/health services +44,000
• Leisure/hospitality +16,000
• Trade/transportation/utilities +30,000
• Financial activities +16,000

“This labor market is rip-roaring hot,” commented Mark Zandi, chief economist at Moody’s Analytics. 

In news on capitol hill, Bernie Sanders introduced a bill that would require the breakup of any financial institution that has a total exposure of greater than 3% of gross domestic product (GDP).  Based on that threshold, six banks and four non-banks would need to be split up.  The banks are: J. P. Morgan (JPM), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), Goldman Sachs (GS) and Morgan Stanley (MS).  Non-banks include Berkshire Hathaway (BRK.A) as well as Prudential Financial (PRU), MetLife (MET) and American International Group (AIG).  Had the bill been law back in 2008, at the heart of the financial crisis, Lehman would have been forced to restructure, with assets that were 4.4% of GDP, and perhaps, the crisis may have been averted. 

Financials are taking the news in stride and rallying as interest rates are on the rise given the strong economic data we saw this morning.  Regional banks are leading the way and are higher by over 2%.  Life insurance company Lincoln National (LNC) is trading higher by 2.7% on above average volume.  Insurance companies earn higher rates of return on their assets when interest rates are rising. 

Federal Reserve Bank of Richmond

Tom Barkin, President of the Federal Reserve Bank of Richmond, highlighted “five numbers to watch” in a speech at the West Virginia Economic Outlook Conference. Below is an outline of his presentation.

        

    If you would like to read the full presentation, click here.

 In a speech on Tuesday in Boston, Federal Reserve Chairman Jerome Powell, discussed inflation and how  the Fed’s success in holding it in check has instilled confidence in the economy that the Federal reserve will continue to control inflation.  He called the economy “extraordinary.” The markets are taking his words to heart today, as a strong ADP report showed payrolls are expanding at a faster clip than expected.  One of the key takeaways from today’s session is that equities are rallying in the face of rising yields and a strong U.S. dollar. 

 

       Today is a risk on day where risky assets are in the green and the Dow is 75 points away from 27,000.

• The Dow Jones Industrial Average is higher by 155 points, 0.56%, @ 26,925
• The S&P 500 is trading @ 2935, higher by 12 points, 0.41%
• The Nasdaq is higher by 0.55%
• The Russell 2000 is higher by 0.97%

        Breadth is improving and, we would like to see new 52-week highs expand.

• NYSE advances 1,773 to declines 1,201; new 52-week highs 63 to new lows 152
• Nasdaq advances 1,973 to declines 1,012; new 52-week highs 37 to new lows 82

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.