The headlines will say that today’s ISM Manufacturing report was weaker than expected, continuing a trend we have seen in the data for some months now, but the reality is that today’s report was still very strong.  Just look at the commentary associated with today’s report.  Whenever you see adjectives like strong, best, huge, and steady dominate, it’s a sign of strength, and this month’s commentary was littered with them.  There was literally not one mention of a weaker manufacturing environment!

As shown in the chart below, the headline index in this month’s report dropped from a multi-year high of 57.8 to a still strong reading of 56.3.  Even at current levels, though, the index is near its highest levels of the expansion.

Taking a quick look at the internals of the report, they were mostly similar to the headline index, as declines were relatively muted and mostly coming from their highest (or near highest) levels of the expansion.  The only categories which showed m/m increases were Prices Paid and Import Orders.  While the increase in Prices Paid makes sense given the weaker dollar, a pickup in import orders doesn’t usually go hand in hand with a weak dollar.  On a y/y basis, most components of the ISM are up considerably from their levels one year ago.  The only category to see a decline was Customer Inventories.

As mentioned above, Import Orders was one of only two categories that ticked higher this month even as the dollar weakened.  What makes this month’s increase in the Import Orders category even more significant is that it’s the highest reading in more than three years!

Finally, each month ISM also asks respondents which commodities are up in price, down in price, and which are in short supply.  In this month’s survey, respondents noted shortages in eight different commodities, which is extremely high by historical standards.  Going back to 2000, there has never been a month where more commodities were in short supply, and the last time there were eight was back in October 2005.

In sports, it’s common for good teams to have a clutch player they can count on at big moments to take the team to the next level.  For the DJIA, Boeing (BA) has been that player.  Boeing has accounted for more than a quarter of the DJIA’s 10%+ return this year, and in July alone, BA was responsible for more than half of the index’s 2.5% gain.  Because the DJIA is price-weighted and BA has the highest share price in the index, it is also the stock with the largest weighting, but even taking that into account, BA has out-pulled its weight by several orders of magnitude.

Along with BA, other DJIA components that had a hot hand in July were UnitedHealth (UNH) and Caterpillar (CAT), which each accounted for more than 8% of the gain in July.  Verizon (VZ) was also impressive.  Although its weight in the index is only 1.5%, VZ accounted for 4.7% of July’s gain.

While these stocks did well in July, a number of stocks are in a slump.  3M (MMM), which has been a big contributor the DJIA’s gain this year, had a horrendous July.  The same can also be said of Home Depot (HD).  The biggest drag on the year, though, has been IBM.  Both this year and in July, IBM has been the biggest downside drag to the DJIA.  In years past, IBM had been a reliable stock, but in recent years, it’s more of an automatic out.