Market Alert - Afternoon Session

It certainly looks as if the indices are in a pre-election holding pattern of sorts. Opening gains were lost but then the indices recovered into lunch and are sporting modest gains. Definitely not making any major breaks yet.

SP500 2.91, 0.14%
NASDAQ 4.75, 0.09%
DJ30 9.41, 0.05%
SP400 0.64%
RUTX 0.11%
SOX 0.78%

The economic data is mixed. The pre-market income and spending was better as oil and gas activity rebounded more than anyone expected. Those are good jobs and thus good incomes. Any pickup adds to the bottom line income and spending more than hundreds, indeed thousands of the usual low wage hourly jobs this economy is so good at making. Still, disposable income, real wages, were down for a second month. Manufacturing is not helping a lot. Maybe not even a little.

Chicago PMI, Oct: 50.4 vs 54.0 exp vs 54.2 September.

Production: 54.4 versus 59.8. That is a drop.

New orders: 52.4 versus 54.1 prior

Prices: 59.5 versus 55.5. This is a big jump. None of the prior readings show this kind of jump to anything near this kind of level.

Inventories fell below 50 and into contraction as companies reduce their stock on hand at the fastest pace since May.

Slowing production, prices rising has some talking stagflation. Prices have and are definitely increasing, and the at very, very best 1.5% to 2% GDP economy is certainly not showing robust growth unless you are the former USSR. That kind of growth would have been miraculous. In the US in seven years of recovery it is a sad joke.

Regardless of the reports of incomes rising, they are still so very low, particularly after so long a supposed recovery. When we talk to small businesses we hear that they as well as their customers just don't have a lot of money. Many could not take part in the stock run up because a lot of what they had was wiped out and the jobs they were able to get paid much less than prior jobs. Customers just don't have that much money and thus business has just never been that good, certainly no where near the levels from pre-recession.

We are watching several potential entries but they are back and forth thus far, not taking a definitive path. As noted, that is what most of the market is doing.


Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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