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Stock Market Rose Four Straight Days For The Week, And CNBC Was Wrong Again

The stock market closed up again for the fourth straight day, reflecting the positive stream of economic data released this past month and some fresh data released on Friday.

The ISM Manufacturing Index was released on Friday. Next to the jobs data, this is probably the most closely watched data points every month. It ticked higher in February for the second month in a row.

It's worth noting that two months ago, when the manufacturing index dipped two months in a row, the cable TV financial channels became grim.

Rick Santelli, who is on CNBC from the trading in floor in Chicago throughout the day, said in a live segment on December 28 that the low manufacturing figure released earlier that day, was "a canary in the coal mine," harbinger of bad times. "2016 is going to have an issue," he warned.

On Friday, the ISM manufacturing data showed its second monthly uptick in a row in February and new orders - a component of the index - rose to 52.8. Anything above 50 indicates the economy is expanding. CNBC's Santelli was totally wrong with his grim outlook two months ago.

Also note the volatility of this data series month to month. While you would never know it from Santelli's report, the manufacturing data series periodically slips below 50 in economic expansions. The information from CNBC's so-called experts throughout every trading day is very often contrary to the facts.

As you can see from this chart dating back to 1950, the manufacturing segment of the U.S. economy has been in decline for seven decades.

This chart breaks down total employment in the U.S. by industry. After World War II, the manufacturing sector provided 37% of the jobs in the U.S. Today, manufacturing accounts for just 10% of U.S. private-sector jobs. While growth in manufacturing was much more important seven decades ago, the Institute of Supply Management's manufacturing index is far less influential today. Talking heads on TV don't give you that kind of perspective all too often.

In contrast, this monthly data from the Institute of Supply Management is much more indicative of what's happening in the U.S. economy lately. It's the index of non-manufacturing orders.

The ISM’s non-manufacturing index measures purchases across 90% of economic activity in the private sector. While this index has a limited history, it is reasonable to assume that the index ISM non-manufacturing PMI would fall substantially to a reading of less than 50 well before the onset of a recession. The data released on Friday showed the index in February ticked lower to 53.4 from 53.5 in January. This index is stabilizing from a few months of declines. To put this reading in perspective, in June 2015, the index hit its highest peak since the ISM started this data series in January 2008. Significantly, however, the new orders in the non-manufacturing sector, a forward-looking component of this index, rose to 55.5, and that bodes well for the weeks ahead.


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This article was written by a professional financial journalist for Houston Asset Management and is not intended as legal or investment advice.

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