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“However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill

Japanese equities were unexpectedly halted for the day due to a trading glitch, but European and US equities are trading on the positive side of unchanged.  US equities are indicated higher by more than half of a percent ahead of a very busy day of economic data and optimism over a new round of stimulus.  How many times can the market rally on the same rumor?

Initial Claims are expected to come in roughly unchanged from last week while Continuing Claims are expected to drop modestly.  Both Personal Income and Spending, on the other hand, aren’t expected to show nearly as much strength as their prior readings. Finally, the Markit US Manufacturing and ISM Manufacturing PMIs are expected to show small improvements versus August’s readings.

Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, Markit Manufacturing data from around the world, trends related to the COVID-19 outbreak, and much more.


The first big economic report of the month will be the ISM Manufacturing report at 10 AM eastern.  Already, we have seen signs of strength in the manufacturing sector based on the positive regional Fed manufacturing surveys, but one of the most closely correlated indices to the ISM Manufacturing report is the Chicago PMI.  As noted in last night’s Closer report, the r-squared of the monthly levels for each report is 0.76.  Based on the results of yesterday’s release which came in well above expectations (62.4 vs 52.0) and was the strongest relative to expectations since October 2013, today’s ISM Manufacturing report should be positive as well.  Even with this month’s increase, though, the Chicago PMI remains well below its peak levels of the prior expansion.

Adding together July’s strong gain, a modest decline in August, and now September’s surge, the Chicago PMI has seen its largest three-month increase in the history of the survey.  With a gain of 25.78 points during that period, the only other period that was even close in terms of the magnitude of the gain was exactly 40 years ago in the three-months ending September 1980 (+24.29).  Looking at the chart, what’s notable about September 1980 and many of the other large three-month rallies in this index is that they occurred right in the early stages of an economic expansion.  That’s the good news.  The one but, and there’s always a but, is that the 1980 period, which was the period with the most similar three-month increase to now, was quickly followed by another recession.  Let’s hope we don’t see double-dip this time around too.

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