The early pain markets experienced appears directly related to people playing with OPM (Other People’s Money) namely hedge funds liquidating and closing out positions. Note last year’s most loved stocks GOOG, AMZN, FB took huge hits after reporting impressive earnings results and last year’s worst performers oil and mining have experienced equally impressive price spikes after having reported terrible quarterly results. This suggests large positions being closed and was reflected in the price action and short covering rallies for commodities stocks in some cases up 30%-50%.  It also helps to explain some of the immense selling pressure that sent health care REIT’s spiraling including some we own. The prices of which have recovered some in the recent rally but more work needs to be done to repair the damage.  

Where we’re at:

Jobs. Non-Farm Payrolls registered in at a solid +242,000 headline figure for February with positive revisions to the prior two months adding an additional 30,000 jobs created. The participation rate climbed to +62.9% which reflects a gain of +.5% since September. This shows people who’ve been long term unemployed are re-engaging the work force. Finally. The Fed has been waiting for this figure to begin ticking higher as a sign of a healthier work environment becomes more inclusive. There was broad based growth across the spectrum notably in healthcare, private education and construction which are good paying jobs. Retail trade and food services also trended well but these jobs tend to be on the lower scale which may explain the tick down in hourly earnings. Mining once again continued to experience declines. 

ISM Manufacturing-ISMM. ISMM saw an increase of +1.3% to +49.5% which while still in contraction territory inched closer to the neutral +50% level.  There were bright spots. The New Orders Index held steady at +51.5%. The Production Index popped +2.6% and Inventories +1.5%. The big declines continue to be in Prices Paid Index at +38.5% reflecting lower materials pricing. On the whole comments from respondents were fairly positive. From Chemicals “U.S. business demand is solid, international soft”. Computers “mobility spend is up”.  Machinery “very strong demand”.  Furniture “orders are coming in stronger than expected”. So, while the headline figure remained in contraction territory should the demand continue its trajectory we would anticipate this indicator to return to positive growth come March’s release.

ISM Non-Manufacturing-ISMNM. ISMNM was virtually unchanged ticking down -.1% to +53.4% from January. A relatively positive report. The Business Activity jumped +3.8% to +57.8. New Orders dropped 1% but remain at a still comfortable +55.5%. Once again respondents were positive on the outlook. Healthcare “overall business is increasing”. Transportation “overall business transaction volume and inventory up year over year”.  Information “business and revenue holding steady”. This report continues to point to a continued steady and moderate rate of expansion.