US equity markets regained their footing yesterday, after a weak performance on Monday, and did so in dramatic fashion. All three major equity market indices gained ground on expanded volume. The Nasdaq (+2.89%), S&P 500 (+2.37%) and Dow Industrials (2.11%) all opened on strength and closed at the top end of their respective intraday ranges. Volume on the NYSE rose 4.12% while volume on the Nasdaq rose a robust 12.57%. Not at all surprisingly, the Sector Heat for the Dow Industrials was a sea of green.
The fuel for yesterday’s punch higher came from a very important place – economic data.
The day began with Motor Vehicle Sales. Ford Motors light vehicle sales jumped nearly 20% in February while Fiat/Chrysler’s rose 12% in the same period; both far above consensus. A theme that really seemed to emerge in February’s auto sales data was the jump in sport utility vehicles and pickups. For example, Jeep reported its best monthly sales figures on record as did the Ram pickup line. Continued strength in autos sales speaks to ancillary themes including cheaper gasoline prices, employment gains and a seasonal shift to increased commercial and home construction.
The Purchasing Manager’s Manufacturing Index (PMI) for February was 51.3, hitting consensus on the nose. The ISM Mfg. Index for the month was 49.5, slightly above consensus of 48.5. To top it all off, Construction Spending for January rose 1.5% on a month over month basis. Consensus had been expecting a more tame 0.5% gain.
Adding additional lift to equity markets yesterday was crude’s continued trade higher. Crude WTI gained 1.6% on the day and has subsequently traded marginally higher in the overnight. Since the February 11th closing low of $26.21/bbl., crude has rallied 26.21%. Not coincidentally, February 11th was also the YTD low for the Nasdaq and S&P 500.
Today’s Economic Calendar is limited in scope but will provide foreshadowing for Friday’s all important payrolls report. The ADP Employment Report is due out at 8:15 AM ESTand the EIA Petroleum Status Report is due out at 10:30 AM EST. The Fed’s Beige Book is out at 2:00 PM EST.
Over the past two weeks, in my “How I See It” segment I have spoken to an equity market bottom, China’s equity market rebound and decoupling from the U.S. equity market narrative, and crude’s rebound among other themes. Additionally, towards the tail end of last week and thus far this week we have received tell-tale economic signs that our US economic expansion is not on life support. Rather, it is increasingly clear that though growth remains subdued by most measures, it is in fact still undeniably present.
Again, this upcoming Friday’s payroll data will be an important touch stone for markets and policy – as outlined in Monday’snote.