The Dow began the day lower by over 100 points but rallied and finished with a gain of 68 points to 28,703. Trading volume was lower while stocks sold off but then finished higher as sideline money moved into equities over the course of the day. Investors are cautious given the increased threat of conflict in the Middle East but a BBC report seemed to indicate that Iran, after 40 years of little military pushback from the US, was caught off-guard by the hit last week and thus might be in a state of confusion over the ramifications. Barron’s noted that US markets were up 75% of the time one year after a major conflict event in the Middle East starting with the Suez Canal in 1956 through the 2003 Iraq war.
Brian “Mr. Sunshine” Wesbury at First Trust commented on the weak reading in ISM manufacturing last week saying that there is a growing gap between the manufacturing data, inventories and personal consumption. He noted that while the ISM manufacturing data was the weakest it’s been in 2009, he thinks the ISM data doesn't match what we are seeing from other reports. The latest report on personal consumption shows goods consumption through November up at a 6.6% annualized rate, on-track to show the largest annual increase for the series in fifteen years. So, if consumers are clearly buying, and companies are apparently not producing, something has got to give. The report also showed that the inventories index declined to 41.1. Customers' inventories have now been declining for 39 consecutive months, which is positive for future factory output. In short Mr. Sunshine thinks the recent slowdown in factory activity is temporary and things will pick up in the months ahead.
With snow in the hills the scouts are getting ready for our annual snow campout at Lake Wenatchee this weekend. This trip acts as a precursor to the snow hike in February. Hopefully, it will be cold and snowy, and we can do ice fishing.