Market Reflections 8/5/2009

Failure of the ISM non-manufacturing report to extend improvement, let alone show erosion as it did, is a setback for the economic outlook. The ISM now thinks its manufacturing report, which had been lagging non-manufacturing, will be the first to show month-to-month stability. The ISM sees its manufacturing index, boosted by an easing in inventory draw and/or a slowing in layoffs, hitting 50 either this month or September.But the ISM news isn't scaling back growth predictions from Goldman Sachs which sharply raised its second-half GDP estimate to plus 3.0 percent. The prediction largely offset the ISM results with the S&P 500 showing limited change on the day, down 0.3 percent at 1,002.69. Commodities held strong with base metals posting big gains and oil, despite a heavy build in weekly crude data, ending higher, just short of $72. Treasuries were whipped sawed this way and that, first up by the ISM then down by Goldman. Underlying everything is the certain prospect of heavy supply, punctuated by the day's record $75 billion quarterly refunding announcement. The dollar index ended fractionally lower at 77.61.