Market commentary

The mantra of President Clinton is returning and it is more true today than during his tenure; “it’s the economy, stupid”. We see this again this morning with the ISM Manufacturing Index falling to 50.9 from 55.3, while a small dip to 54.5 was anticipated. The Prices Paid component dropped dramatically to 59.0 from 68.0, however, the most critical component was that New Orders dipped below 50 to 49.2 from 51.6 in June. Recall that a reading below 50 reflects business is actually slowing versus growing at even a moderate pace.

Our leaders in Washington D.C. have yet to agree on a budget or debt ceiling compromise, so the markets remain wary and skittish. As the rating agencies have repeatedly stated, raising the debt ceiling alone will not avoid a cut in the AAA rating of the U.S. There has to be some responsible deficit reduction plan in place.

The weak economic data has pushed Treasury yields lower this morning, with the 10 year note now trading at 2.73%, and the DOW is now trading less than 100 points above the 12,000 level.