February 21, 2020
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Marc Sutin’s Market Analysis Note – Friday February 21, 2020
A Quick Take on the Markit PMI Data –
In the chart below of the Markit February Preliminary PMI’s the black line is Manufacturing, the pink line is the Composite index and the green line is Services.
All 3 series (Composite, Manufacturing & Services) retreated in February (preliminary data) driven by a notable weakening in the service sector.
New orders fell for the first time since the data began in October 2009. New export orders fell for the second month. Despite this business confidence series rose to an 8-month high though the level is subdued. Maybe we should take heart that it did not deteriorate. Markit said that firms “highlighted ongoing global uncertainty and the outbreak of the coronavirus” which resulted in a greater hesitancy among clients to place orders.
The Manufacturing PMI at 50.8 retreated towards the lows of the fourth quarter at 50.3. A reading of 50.8 is almost no growth and Markit said that it was due to a “near-stalling of orders”.
Recall that in the fourth quarter of 2019 investors were concerned that manufacturing weakness would bleed thru to the service sector and raise the probability of a recession. Markets were encouraged and equities rallied as the manufacturing PMI’s improved.
The coronavirus outbreak seems to have thrown a monkey wrench into the recovery.
Now it is the Services PMI that is driving the weakness as it fell sharply to 49.4 form 53.3. This drove the Composite PMI down to 49.6 which means contraction., albeit slight. Markit wrote “With the exception of the government-shutdown of 2013, US business activity contracted for the first time since the global financial crisis”....MORE.....
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Marc Sutin is President of Intuitive Analysis, LLC. As President he serves as analyst, publisher and communicator of the firm’s outlook for the financial markets.
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