| Trading the ISM Manufacturing PMI Number |
by S. Wade Hansen The market is struggling today to overcome another negative economic release. The Institute of Supply Management (ISM) manufacturing report declined slightly to 52.6 in September. If the reading is above 50, the economy is considered to be growing and a release below 50 is indicative of contraction. However, it should be noted that on the positive side this is the second month in a row of above 50 readings since July of 2008. When looked at within the trend, today's ISM number is actually a positive sign that economic recovery is still underway. Learn more about other economic releases within the videos linked below. - Why most investing news is meaningless - Why consumer confidence reports matter- How do the labor reports affect the markets ISM Manufacturing PMI: A Glimpse Into the Health of the Economy Once a month, the Institute of Supply Management—a private firm—gives us a glimpse into how well large manufacturers are doing. Traders love this information because manufacturing numbers can tell them a lot about how the economy is doing.  When the ISM Manufacturing PMI number is above 50, it indicates the manufacturing sector is expanding, which means the economy is growing and stocks will most likely increase in value. When the ISM Manufacturing PMI number is below 50, it indicates the manufacturing sector is contracting, which means the economy is contracting and stocks will most likely decrease in value. Of course, there are certainly other factors you should be looking at when determining the health of the economy so Don't Read the News in a Vacuum. The Institute of Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI) number is compiled from a survey of purchasing managers. Purchasing managers are on the front lines of manufacturing and see first hand how businesses are performing. When business is good, purchasing managers have to buy more raw materials to fulfill orders. When business is bad, purchasing managers have to buy fewer raw materials to fulfill orders. You can see the most recent ISM Manufacturing PMI report here. Manufacturing Stocks to Watch Here are a few of the companies with broad economic reach you should keep an eye on: - Caterpillar Inc. (NYSE: CAT) - Deere & Company (NYSE: DE)
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3.25 Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved." |
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