REUTERS/Carlo AllegriA child runs past a grand piano that has been left by the East River underneath the Brooklyn Bridge, in the Manhattan borough of New York May 31, 2014.
All eyes were on the monthly manufacturing reports. And then one data provider made an error. Actually, two errors.
First, the scoreboard:
- Dow: 16,743.6 (+26.4, +0.1%)
- S&P 500: 1,924.9 (+1.4, +0.0%)
- Nasdaq: 4,237.2, (-5.4, -0.1%)
And now the top stories:
- Two data providers published the results of their monthly manufacturing surveys. First was Markit, who reported that its May manufacturing purchasing managers’ index (PMI) increased to a three-month high of 56.4 from 55.4 in April. This was a bit higher than the 56.2 expected by economists. “With the exception of a brief spell in early-2010, output is growing at the fastest rate seen since prior to the financial crisis,” said Markit’s Chris Williamson. “The household sector in particular is leading the upturn, with demand for consumer goods rising at the fastest rate for four years. This is therefore very much a domestic led upturn, but it is encouraging to also see that growth of export orders picked up in May, pointing to an improved trade balance in the second quarter.”
- The Institute of Supply Management’s report followed. But it took them three tries for them to get it right. First, at 10:00 a.m. ET the ISM said its headline index unexpectedly fell to 53.2 in May, missing expectations for a print of 55.5. This had economists scratching their heads. “The unexpected decline in the US ISM manufacturing index to a three-month low … contrasts with the improvement in the regional activity surveys and the national Markit PMI,” said Capital Economics’ Amna Asaf. “Even global manufacturing activity has been gradually improving. All this suggests that the ISM index will rebound in June.” But that rebound came sooner than Asaf probably expected.
- Right after that initial report, research firm Stone & McCarthy speculated that ISM used the wrong seasonal adjustment in calculating its number. Just before 11:30 a.m., ISM’s Bradley Holcomb said that’s exactly what happened due to a “software error.” At that time, ISM revised the number up to 56.0, which would’ve been a huge beat.
- And then at 12:26 p.m., ISM revised that number again, this time to 55.4. That was basically in line with the 55.5 expected by economists. And it basically confirmed Markit’s report that manufacturing activity accelerated in May.
- “It looks like Thomas Piketty isn’t the only one prone to making calculation errors,” said Capital Economics’ Paul Ashworth after the first correction. “Amateur hour at the ISM strikes again,” said Pantheon Macroeconomics’ Ian Shepherdson after the second correction. “ISM made a mistake, another reason not to trust anecdotal information on the economy,” said Bank of Tokyo-Mitsubishi’s Chris Rupkey.
- The Dow and S&P 500 closed marginally higher, meaning that this was a record-high close.
- “The bull is back on steroids, especially for transportation stocks,” said stock market strategist Ed Yardeni. “The strength of the S&P 500 Transportation index also confirms my secular bull market thesis. This index is now 66% above its previous record high on June 5, 2008. As I noted last week, the S&P 500 is 23% above its previous record high on October 9, 2007. This is a bullish development according to Dow Theory, which posits that as the DJIT goes, so go the economy and the DJIA.”