The June ISM was important, not just because the headline number was stronger than expected, but the components were strong as well: new orders rose modestly, employment jumped.
Most important are that the factors that loomed large in the soft patch (supply chain disruptions, higher commodities) may indeed be mitigating:
1) the prices-paid component declined to the lowest level since August 2010, indicating cost pressures are easing;
2) inventories rose to the highest level since November...this indicates inventory rebuilding following supply chain disruptions from the Japanese quake.
It's not like inflation has gone away. A representative from Chemical Products said, "We continue to see inflation, though at a reduced rate [compared] to earlier months."
Still, "at a reduced rate" is enough to spark buying from active traders, who came into the last week of the month with lower levels of stock ownership than the beginning of the month. Many have been outright short — and have been burned.
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