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Next Econo-Data Bomb
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If you think Friday’s GDP means we’re out of the woods think again. Another piece of data is coming that could rock markets.
We’re talking about China PMI due Sunday night
According to Reuters estimates China's official PMI will likely be at a 17-month low as Beijing’s policies to curb lending and rein in the property market weigh on manufacturing.
China July PMI Estimate
Median: 51.1 (Lowest Since Feb. 2009)
Range: 50.0 to 51.7 (11 forecasts)
Previous: 52.1 in June, 53.9 in May
Source: Reuters
The headlines number is expected to be weak, but it’s what lies beneath that matters more.
Investors will be paying particular attention to the new orders and stocks of finished goods. The former slumped in July, while the latter rose, suggesting big inventory accumulation and possibly future cuts in factory production, writes Reuters.
What’s the takeaway?
If the PMI remains above 50, the declining trend should be largely factored into the market.
However the whisper number is below 50, reveals Guy Adami. If it drops below 50 -- the boom-bust line -- it would likely rock markets, given that China could account for a third of global growth this year.
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John Stephenson, author of The Little Book Of Commodity Investing doesn't think a number below 50 is in the cards.
"I expect China to come in with a solid PMI number north of 50 for sure," he tells the Fast Money desk. However he concedes if the number is weaker than 50, commodities will take a big hit. "Commodities clearly are the risk trade and if you do see China weak, you'll have to run."
PMI aside, Stephenson is bullish commodities long-term. "Big picture ten year out, five years out, even one year out commodities are going to be hot. They'll be the one thing that will be working in this market."
However if you're not a professional trader rather that play the contracts, he suggests looking at the following stocks as proxies.
John Stephenson’s Ways To Play
Freeport McMoRan [FCX
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Cliffs Natural Resources [CLF
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Alcoa [AA
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Chevron [CVX
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Cenovus Energy [CVE
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"It's far too hard for amateurs to roll contracts and look at times series; ETFs have problems as well so I recommend (retail investors) settle in on the commodity producers."
And he likes these companies no matter what happens with the broad market. "Commodities do well oftentimes when other investments don't do so well. In part because they're raw material imput into other processes."
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Trader disclosure: On July 30, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova owns (AMZN), (EMC), (CREE), (BRCM), (LRCX), (COP), (AXP), (BMO), (CSX), (PEP), (CVS), (GS), (PCP), (C), (APA), (FCX), (JOYG), (MMM), (MOS), (UAUA), (WYNN), (GOOG), (BBY), (SU), (KOL), (XBI), (BAX), (JNPR), (UAUA), (RIMM); Finerman owns (AAPL); Finerman’s firm owns (BDX); Finerman’s firm owns (COV); Finerman’s firm owns (STS); Finerman owns (JPM); Finerman’s firm owns (JPM); Finerman owns (BAC); Finerman’s firm owns (BAC); Finerman’s firm owns (RIMM); Finerman owns (RIMM); Grasso owns (ASTM), (ABK), (BAC), (BA), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (NDAQ), (PFE), (PRST)
For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)
For Steve Grasso
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (ESV)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (LEN)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (SYMC)
Stuart Frankel & Co and it’s partners own (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS
Stuart Frankel & Co and it’s partners are short (QQQQ)
Stuart Frankel & Co and it’s partners are short (KEG)
For Patty Edwards
Edwards owns (AAPL) for clients
Edwards owns (AA) for clients
Edwards owns (CVX) for clients
Edwards owns (COH) for clients
Edwards owns (FCX) for clients
Edwards owns (INTC) for clients
Edwards owns (TXN) for clients
Edwards owns (WFMI) for clients
For John Stephenson
First Asset Investment Management Owns (GLD), (FCX), (AA), (CVX), (CVE)
Stephenson Owns (GLD), (FCX), (CVE)
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