Stocks produced a bumpy ride to close out the third quarter of 2009. Investors reacted to a parade of economic data. A positive revision for the final Q2 GDP numbers was overshadowed by an unexpected decline in the Chicago PMI and the ADP employment report. Commodities are bouncing as the dollar's bounce rolls over. The S&P 500 index is on track to end the third quarter with a 15% gain. At the moment stocks have recovered from their morning lows and are now trading in positive territory.

Asian markets were mixed again. It was a relatively quiet session for Japan and Hong Kong. The Chinese Shanghai index ended a three-day losing streak ahead of a "The Golden Week", which is the eight-day national holiday to celebrate the 60th anniversary of the founding of the People's Republic of China. HSBC released their China Purchasing Managers Index (PMI) on Wednesday, which slipped from 55.1 in August to 55.0 in September. August was a 16-month high and September is the sixth month in a row that the PMI was in positive territory above 50. The Japanese NIKKEI gained 0.3% for the day and 1.7% for the quarter. The Chinese Shanghai index rose 0.9% for the day and lost 6% in the third quarter. The Hong Kong Hang Seng inched down 0.2% on Wednesday but posted a 14% gain for the third quarter.

Most of the European markets were in positive territory until the Chicago PMI data hit the wires and sparked a widespread sell-off. England saw some positive economic news with consumer confidence surging to its biggest one-month jump since 1995 and hitting its highest levels over a year. The English FTSE index lost 0.5% on the session but gained almost 21% for the quarter. The German DAX index fell 0.67% for the day but rose 18% for the third quarter.

The big story today was the Chicago Purchasing Managers Index (PMI). Economists were expecting a rise to 52. Unfortunately the results saw a fall from 50 in August to 46.1 in September. Numbers under 50 indicate a contracting economy. While this is only a regional report it is seen as a forerunner for the national ISM data out on Thursday. If manufacturing activity is faltering then the market's confidence in a "V" shaped recovery may be misplaced.

The private-sector ADP National Employment Report was released this morning with employment falling by 254,000 jobs in September. This is also seen as a bad omen for Friday's non-farm payrolls report. ADP revised their August job losses to 277,000. Economists were expecting the September ADP number to come in at 200,000-210,000 lost jobs for the month. At -254K jobs it is still the best month since July 2008 but the results undermine investor confidence. Analysts are already predicting that the government's official unemployment rate will rise from 9.7% to 9.8% in September. Current estimates put the non-farm payrolls report at a loss of 180,000 jobs. After today's ADP number people are probably revising their estimates a little higher.

Another worrisome headline today is the drop in mortgage applications. The Mortgage Bankers Association said applications last week fell to their lowest levels in four months. Applications for new purchases fell more than 6% even as mortgage rates dropped to 4.9% for a 30-year fixed loan. The all-time loan was 4.61% in March 2009. The much-needed rebound in the housing sector could be further away than we hope if banks aren't lending and consumers aren't buying!

Not all the economic data out today was negative. Economists were expecting the final revision to Q2 GDP to fall from -1.0% to -1.1%. The Commerce Department released the data this morning with Q2 GDP coming in at -0.7%. The GDP numbers have definitely developed a bullish trend of smaller declines. Let's hope this PMI data out today doesn't portend a reversal in the economy.

In corporate news today CIT Group was back in the headlines. You may recall over the summer that CIT came close to bankruptcy as it struggled with liquidity and rising defaults. CIT is one of the biggest commercial lenders to small and mid-sized businesses. They're so big that that the government gave them $2.3 billion in TARP money last fall. Over the summer when CIT was scrambling to avoid bankruptcy it looked like disaster was averted when some of the company's biggest bondholders provided a $3 billion emergency loan. Now CIT is back at the negotiating table. They're asking bondholders to do a debt exchange for equity (stock) in the company. The Wall Street Journal estimates that CIT is trying to exchange up to 40% of its $30 billion in debt for stock and if CIT fails to reach another agreement with debt holders it will file for bankruptcy making it the fifth largest bankruptcy in U.S. history (source: Reuters).

At the moment stocks have rebounded back into positive territory. It might be end of quarter window dressing but the market has shrugged off its morning decline and the major indices are back in the green, albeit with minor gains. The S&P 500 is up less than one point at 1,060. The NASDAQ composite is up less than nine points at 2,132. The Dow Industrials are up about 14 points at 9,756. The small cap Russell 2000 index is still down but it's only down about one point at 609.

Let's take a quick look at charts for the major averages:

Chart of the S&P 500:

Chart of the NASDAQ:

Chart of the Dow Industrials:

Chart of the Russell 2000 index:

It's been a volatile session on Wall Street and we're definitely seeing some volatility on the play list. ACL plunged toward short-term support near $135 and is bouncing back toward $140. CAT dipped toward $50.00 but didn't quite hit our trigger to buy calls yet. Oil service stock DO dipped toward $94 before bouncing back into positive territory. FMX is breaking out and has hit our trigger to buy calls at $37.55. HP has hit our trigger to buy calls at $38.50.