Intraday Market Update
US and global equities soar higher after a plethora of favorable economic reports from around the globe. Things got started overnight when China's PMI index increased more than expectations, and in a separate report Chinese Manufacturing data rebounded from contraction in July to expansion in August. Elsewhere, Australia's Q2 GDP also rose more than estimates while PMI data out of Europe continued to show expansion, albeit at a slower pace. The S&P 500 gapped +10 points higher at the open despite ADP's employment report which showed a decline of -10,000 private jobs in August. That number was quickly forgotten shortly after the bell when a better than expected US ISM Manufacturing Index catapulted the S&P 500 another +12 points in a matter of 5 minutes. All of the major indexes have now gained over +2.50% and are testing their 20-day and 50-day SMA's from below. The S&P 500 has tacked on a total of +28 points, the DJIA +230 points, the NASDAQ +55 points, and the Russell 2000 +18 points. Crude oil and copper have gained nearly +3% each, but other commodities are not participating in today's rallyEquity markets throughout Europe gained nearly +3%, while the Asia-Pacific region posted solid gains. However, China lost -0.60% despite the good economic news.

The ISM Manufacturing Index surprisingly improved to 56.3 in August from 55.5 in July which signals growth at an accelerating rate. Estimates were calling for a reading of 53.0. This report marks the 13th consecutive month the manufacturing sector has been above 50 which separates contraction versus expansion. Digging deeper into the report the growth is centered around lagging indicators in the general business activities of production, employment, and inventories which all accelerated in August. The leading indicator components of new orders and unfilled orders both declined. New orders posted the lowest reading in over a year since the manufacturing recovery began, while unfilled orders posted its weakest reading since December. The slowing in order builds should be a concern about future growth, but the report is still favorable and stocks have reacted accordingly.

Before the bell the ADP Employment Change Report showed private sector payrolls declined by -10,000 jobs in August compared to July's +37,000 increase, which was downwardly revised from +42,000. This report does not include government hiring and firing and comes ahead of Friday's non-farm payroll report. Excluding government hiring and firing August's non-farm payrolls are expected to increase +42,000 after expanding by a disappointing +71,000 in July. This estimate is supported by the solid employment numbers in the ISM report but not so much by the weak numbers in the ADP report. Any disappointment in Friday's numbers will likely see the indexes move back down, while any surprises will likely result in a continuation of today's rally.

Meanwhile, the recent plunge in home sales and decrease in housing starts has carried over to construction spending as it has returned to contraction, dropping more than expected to -1.0% in July. Estimates were calling for a drop to -0.5%, while June's +0.1% increase was revised to a -0.8% drop. Construction spending y/y is down -7.9%.

The Mortgage Bankers Association Purchase Applications index rose +1.8% which is only a slight increase from a very depressed level to begin with. This points to no material improvement for new home sales in August or existing home sales in September. Current homeowners continue to take advantage of low rates as the refinance index gained +2.8%, reaching a 15-month high. The rate on the average 30-year fixed rate loan dropped -12 bps 4.55%.

In equities, shares of Burger King (BKC) have gained +15% after a WSJ report that private equity firms were looking to take out the fast food chain. Alcoholic beverage manufacturer Brown-Forman (BF/B) was down -10% after missing earnings and revenue estimates, but the stock has pared some of the losses to settle in at -5%. And Dollar Thrifty (DTG) increased its 2010 EBITDA guidance and cut its fleet cost targets. They also expect solid fundamentals in the used car market in 2011 as they expect the demand for used cars to be firm. DTG is up +1%.

Core Sector List:
Overall reading: 20 sectors advancing, 0 sectors declining
Strongest Sectors: Coal, Oil Services, Oil, Transportation, Banks, Broker Dealers
Weakest Sectors: Gold Miners, all others but Telecom are up more than +2%


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