This week's U.S. news was remarkably bullish. The service sector's PMI reading was very strong and the surprisingly solid employment report may have put an end-of-the-year rate hike back on the table. As a result, the SPYs finally broke through key resistance to make a new high. But stocks are still expensive. And with another weak earnings quarter fast approaching, it remains doubtful equities will be able to make and hold meaningful gains.
The ISM service's report was very strong: the index increased 3.6 points to 56.5; activity rose 4.4 points to 59.5 and new orders gained 5.7 points to 59.9. 15 of 18 industries reported positive activity. Most importantly, the anecdotal comments were very encouraging:
“business is generally good and following historical seasonal patterns. Suppliers report being very busy compared to last year.” (Management of Companies & Support Services)
“Business is strong in the private sector; bidding a lot of commercial buildings.” (Construction)
“Slightly greater activity, specifically due to midyear reporting.” (Finance & Insurance)
“Oil prices seem to be stabilizing in the $48/bbl. range which has eased the panic in the industry over falling prices.” (Mining)
“Overall business appears to have flattened out. New business for the next six months looks good according to sales forecasts.” (Professional, Scientific & Technical Services)
“Steady movement with negligible fluctuations both up and down.” (Public Administration)
“Business was slow, but starting to pick up this month.” (Retail Trade)
“More new business.” (Utilities)
“Oil, gas, steel [and] coal mining continues to drag down revenues. Automotive, food, package handling and airports [are] strong.” (Wholesale Trade)
“Overall business conditions are good, even though growth is flat.” (Health Care & Social Assistance)
