Equity futures were up overnight on the back of a strong manufacturing report in China and a better than expected Tankan survey in Japan. Asian stocks were up 1%+ across the board and set the table for global gains. U.S. investors received some further reassurance as preliminary jobs data and ISM confirmed the data in Asia.
The Monster Employment Index came in a tick higher at 125 compared to last month’s reading of 124. Jesse Harriott, senior vice president at Monster says firms are ready to start hiring again:
“We’re encouraged by the positive uptick in the Index in the past two months. The Index results may be a signal that companies intend to start hiring again. While the labor market continues to be challenging for those looking for work, we are encouraged to see early signs of what may be a return to consistent job growth.”
The Challenger layoff report spiked higher as the Postal layoffs hit the data, however, hiring actually jumped to 13,994 vs. 8,300 in February. The weekly jobless claims continued to show its consistent improvement as claims fell to 439K. Analysts had been expecting a reading of 440K. All of this likely bodes well for tomorrow’s jobs data.
ISM Manufacturing data is showing another robust reading this month as the data comes in at 59.5 – well above analysts estimates of 56.3 and substantially higher than the “expansion” reading of 50. Strength was broad as Econoday reports:
“Manufacturing enjoyed robust month-to-month gains in March offering convincing evidence of recovery for the sector, according to the results of the ISM’s monthly report. The ISM manufacturing index jumped 3.1 points to 59.6, a reading well above 50 to indicate very solid growth compared to February. All the major components show strength led by new orders which are back above 60 at 61.5 for a 2 point gain from February. Production, which follows new orders, is also back above 60 at 61.1 for a nearly 3 point gain. Inventories are a very key positive, soaring a very surprising 8 points to 55.3 to indicate wide restocking in the manufacturing sector. Inventories are really the difference for March.”
The employment reading was a robust 55.1 which further solidifies the improvement in the jobs market. The latest headline ISM reading is an all-time high for the index. If there is one negative in the report it is that prices are coming in very hot with a reading of 75 versus 67 last month.
Of course, with improvement in the labor market and record high ISM the most interesting question in all of this is: “why are interest rates still at zero?” Perhaps more importantly, at what point does the market begin to anticipate this “good” news as “bad” news? The Fed’s hand will be forced sooner rather than later. How that impacts the market is anyone’s guess, but past tightening cycles have not been friendly to stocks.
Interestingly, the market is shrugging off the weaker than expected earnings from Research In Motion. Whether RIMM is a blip on the radar or a sign of more difficulty in the earnings picture remains to be seen, but this appears to be a risk that investors are comfortable overlooking at this juncture.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.