Monday, March 2, 2015
Stocks aren’t expected to do much ahead of the open this morning, with market participants looking ahead to key economic readings later today and the rest of this week.
The key report today is the February manufacturing ISM survey coming out a little later where the expectation is for the index to modestly pull back from January’s level. Friday’s unexpected drop in the Chicago PMI to that well-regarded survey’s lowest read since 2009 bodes poorly for today’s national reading. More than any other regional survey, the Chicago PMI has quite a track record in foretelling the national factory sector survey, which itself is one of the best forward looking economic indicators around.
The ISM isn’t the only key report this week. As is the case every first week of the month, we will be getting the February non-farm payroll report on Friday, with consensus expectations of 230K ‘headline’ job gains vs. 257K in January and the unemployment rate ticking down to 5.6%. Wage gains will be in the focus in the jobs report, with consensus expectations pegging the wage gains at +0.2% following the strong +0.5% gain the month before. Other key reports this week include Wednesday’s service-sector ISM survey and the ADP jobs report.
The key point that we want to take away from this week’s reports is to get a handle on the U.S. economy’s growth momentum. As we know, the U.S. economy expanded at a super-fast growth pace in the middle two quarters of the year, but lost momentum in the last quarter of the year and recent data has been indicating that the weakening trend has carried into the current period. Confirmation of this will have Fed implications as well, with the FOMC unlikely to be in any hurry to ‘normalize’ interest rates if the economy was losing ground.
In corporate news, Hewlett-Packard (HPQ) is acquiring wireless networking services provider Aruba Networks (ARUN), with HP hoping to strengthen its enterprise mobility offerings with the deal. The other major M&A news of the day is from the semiconductor space with NXP Semiconductor (NXPI) acquiring Freescale Semiconductor (FSL) for more than $11 billion that will result in a roughly $30 billion market cap industry player.
Sheraz Mian
Director of Research
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