MIDDAY ACTION, Sept. 4

The ISM Index, which is a measure of manufacturing activity across the country, fell slightly in August to 52.9 percent. This is still above the expansion line at 50, but was off July’s reading of 53.8 percent. Within the data, traders were pleased to see a gain in the employment component and a slight drop in prices paid. However, since this data is a bit dated, it hasn’t gotten the attention it normally gets.

Economic data will be a focus this week with data on the jobs market on tap. However, analysts feel this time around this data won’t carry the same weight it has in the past. This is because regardless of what the data shows, it isn’t likely to impact the Fed’s decision on interest rates.

Merrill Lynch cut its rating on a slew of staffing companies on the outlook that the economy could fall into a recession and that this would hurt the jobs market. Merrill sees a 65 percent chance of a recession. The broker cut its rating to “Sell” on several stocks, including Manpower () and Heidrick & Sons (). These two stocks are down 3.5 percent and 7.0 percent respectively on the news.

Bear Stearns has provided strength for Yahoo () shares after the broker chose YHOO as its top pick for the next 12 to 16 months. This news has lifted YHOO shares by about five percent. Intel () has also benefited from analyst comments with Banc of America Securities raising its price target on the chip stock to $31 from $29. INTC shares are up nearly two percent on the news.

Volumes are expected to remain light today as traders await further news on the strength of the economy and the Fed’s reaction. Now that a Fed rate hike is expected, the Fed has to be careful not to throw traders a curveball. If rates are not cut, stocks could see sharp declines. In fact, it is unclear how much strength stocks would get from a rate cut given that a cut is expected.

Jody Osborne
Senior Writer & Options Strategist
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