June 2, 2003
Markets Wait for Manufacturing Data

An abbreviated word to begin the week is applicable given that trading is likely to hinge upon this mornings ISM report on manufacturing.  A reading above 50 on the ISM – signally expansion - could certainly provide fuel for the markets, whereas a reading below 50 could perturb investors.  I use the term ‘investors’ lightly, as anyone buying/selling stocks based upon this morning report is not investing per se.

Friday’s jobs report, like the ISM, will be a blockbuster report.  However, before another expected decline in payrolls arrives the ECB will likely weigh in with a rate cut on Thursday. In short, this week’s update on manufacturing, the jobs numbers, and the dollar/euro action will guide trade.

As for the Fed’s ongoing fight against deflation – a subject that has been beaten to death since last months FOMC statement – there is only one conclusion to be drawn: if the Fed is unsuccessful at fighting deflation there is one investment is worth owning: gold.

Will the Fed be successful at fighting deflation?  Probably. To be sure, if central banks vie to create the most worthless medium of exchange possible the potential outcome is financial catastrophe; a hyperinflation here, a deflation there, a gold-standard somewhere…its all bad.

In sum, there will likely be a concerted effort to buy dollars by central banks when the appropriate time comes.  While deflation/inflation is the end result of central bank operations, the operations themselves are likely to persist, which means a return to a gold standard is not yet on the horizon. As for Japan – supposedly suffering economically for more than a decade because of ‘deflation’ (as if this menace arrived from thin air) – the last time I checked Yen was still being printed...Japan’s pricing environment remains unpredictable.
 

Date Release For Briefing Consensus Prior Jun 02 Auto Sales May 5.5M 5.4M 5.4M Jun 02 Truck Sales May 7.5M 7.5M 7.6M Jun 02 ISM Index May 50.5 48.5 45.4 Jun 02 Construction Spending Apr -0.7% 0.2% -1.0% Jun 04 Productivity-Rev. Q1 1.9% 2.0% 1.6% Jun 04 ISM Services May 53.0 51.0 50.7 Jun 05 Initial Claims 05/31 420K NA 424K Jun 05 Factory Orders Apr -1.1% -0.9% 2.2% Jun 06 Nonfarm Payrolls May -50K -25K -48K Jun 06 Unemployment Rate May 6.0% 6.1% 6.0% Jun 06 Hourly Earnings May 0.2% 0.2% 0.1% Jun 06 Average Workweek May 34.1 34.2 34.0 Jun 06 Consumer Credit Apr $2.0B $3.0B $0.9B

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