Post-ISM — Are 'Game the Fed' Traders Right?

The S&P index rose 10 points as the August ISM showed surprising strength: 50.6, above consensus of about 48. A figure above 50 shows expansion, but the commmentary remains mixed:

1) From a Machinery participant in the survey: "Business is soft, confidence is down, and we are cutting inventory and expenses."

2) Transportation Equipment: "Current headwinds in the national and international economic environment have increased uncertainty, and are affecting our customers' willingness to commit to high-dollar equipment purchases."

3) Plastics & Rubber Products: "We continue to post solid numbers, but the situation seems tenuous."

4) Apparel and Leather Products: "Automotive business (represents 52 percent of our sales portfolio) continues to be strong. "

5) Furniture: "Sales continue to be sluggish."

Watch now to see how stocks trade: if the "game the Fed" crowd is right, stocks should come off their highs on expectations that QE3 (quantitative easing) is now less likely.

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