This past week has been a case study in what is moving the market recently. While the main focus from the financial media has been on the flurry of jobs data, the biggest market reactions in terms of price movement have come in response to something else. ISM data has been the market mover all week, and a simple view of the intraday chart of SPY (the ETF that tracks the S&P500) reveals this truth.
This week we had 2 ISM releases, one on Tuesday and one on Thursday. Both of them were reported at 10:00 am est. On Tuesday the market expected the ISM index to come in at 53.00, the actual report came in 54.8, or above expectations. Thru the first half hour of the day Tuesday, the S&P500 was flat, but as soon as that number hit, SPX moved unimpeded from 1,396 to 1,410. This also coincided with data on construction spending that came in well below forecasts, so the price action tells us that the market was without a doubt more focused on ISM, and on Tuesday it worked in favor of the bulls.
On Wednesday we already pointed out that the market had a muted reaction to the poor ADP data that was reported. On Thursday we had the best example of where the market is focusing its attention. Weekly jobless claims came in better than expected yet the market opened flat. This number clearly did not have an impact on the market. In fact, the market didn’t make a decisive move until 10:00 am.
10:00 am is when the ISM services index was reported. The market was expecting a reading of 55.5 but instead the index came in at 53.5, or below expectations. The market promptly sold off, with SPX dropping from 1,401 to 1,395 before ultimately closing at 1,391. So in our view the market is clearly more concerned with data like ISM than jobs. How do we know? Because we just highlighted the markets reaction in real time within minutes of ISM data coming out vs. jobs data.
Don’t get us wrong, the unemployment report is important and likely to move the markets in some fashion. However, if this recent weeks worth of price action relative to the news that has come out is any indication, the unemployment report isn’t the end all be all for neither the bears or the bulls. Thus, do not overreact to a positive number or a negative number because the market has shown us its focus is elsewhere.
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