ISM just came in at 10:00 a.m. and missed @ 57.3 (consensus 59.5) which sent the market higher at 10 because good news is bad for the market and bad news is good for the market; this is all about QE/interest rate expectations and a bad number, theoretically, makes it harder for the Fed to hike rates if the recovery isn't seen as stable so we get the knee jerk reaction.
Rally right at the release of the ISM
And a positive divergence that sharpened as the market was wobbly this morning suggests the number was leaked and someone was buying in anticipation of the release. It's not hard for these numbers to be leaked, any intern at a financial outlet who has the report embargoed until 10 a.m. could easily get a glimpse of the report and pass the information along to any number of sources for any number of reasons of personal gain. I never dismiss things like this, especially when you see them as often as I do.
In the report, services PMI missed, Broad Business Activity dropped hard, prices paid fell slightly (this is also god for those who don't want to see monetary tightening), New Orders and EMPLOYMENT declined. Respondents are still worried about inflation and supply chain disruptions.
All in all, this is one report that suggests that it' too early to tighten monetary policy, which the market likes. Still, it's one report and if inflation continues to be a problem, it won't matter. This ONE report showed a slight decrease in inflation, but this is one report vs. a chain of reports that have all showed rising inflation, which would put pressure of the Fed to hike. Therefore, I'd think the effect of the knee jerk reaction won't be too serious. If anything, I would expect buying today to come from the NASDAQ's rebalancing of the NASDAQ 100's weighting of components.
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