Two important economic indicators
On Monday, October 5, 2015, two key economic indicators were released for September. One of the indicators was the US Services PMI (purchasing managers’ index). The other was the ISM’s (Institute for Supply Management) Non-Manufacturing Index. The US Services PMI’s actual reading was 55.1 less than the consensus value of 55.8. The ISM’s Non-Manufacturing Index was 56.9 while the consensus reading was 58. Both of the indicators couldn’t meet the prior expectations. They pointed towards the slowdown in new orders and business activity.
The above readings along with the non-farm payroll employment data that couldn’t meet the forecast number of 203,000 employments led investors to think that the rate hike is less likely this year. The zero interest rate policy since the financial crisis in 2008 has always bolstered the stock market. Due to the anticipated delay in the rate hike, the stock markets rallied across the globe. As a result, the SPDR S&P 500 ETF (SPY) and the Direxion Daily S&P 500 Bull 2X ETF (SPUU) soared high on Monday, October 5. They rose 1.78% and 3.94%, respectively.
US dollar rose over Friday’s continued rally
The above graph shows SPY’s performance versus the overall bond market and the US dollar.
The US dollar was weak on Friday, October 2, due to the poor jobs report. However, the rise in the stock markets and the rise in investors’ willingness for risk boosted the currency on Monday, October 5. US Treasury bonds fell on the day due to a lower probability for a rate hike this year. This made it less attractive as an investment avenue. The bond market is represented by the Vanguard Total Bond Market ETF (BND). It fell 0.39% on October 5. The PowerShares DB US Dollar Index Bullish (UUP) rose 0.04%.
The stocks that hogged the limelight for the day were Denbury Resources (DNR), Micron Technology (MU), and Avon Products (AVP). We’ll look into the sector performances and the stocks in subsequent series.