Yesterday

-Started strong thanks to Europe and tepid Jobless Claims

- Chicago PMI stormed the castle; Biggest beat in 30+ years

- Bond markets couldn't help but react, making new post-NFP lows

- MBS clawed their way back to positive territory by the close

Today

-The national equivalent of the Chicago data hits today (ISM Manufacturing Index)

- Month-end tradeflow considerations are gone, so reaction to data will be more pure

- ISM and Chicago PMI are heavily correlated throughout the years

- But there have been cases where ISM hasn't responded to similar divergences in the past

Strategy

ISM Manufacturing and non-manufacturing are two of the most widely followed economic reports and are key players in the ensemble of non-employment-related metrics that also pack a decent punch when it comes to inspiring movement in bond markets.  By way of caveat, they do contain employment indexes, so there is an employment component, but not in the same league as Nonfarm payrolls (nothing is).

Today we get ISM Manufacturing--a fact made more interesting by yesterday's surreal trouncing of expectations by the very similar Chicago PMI.  How Similar?  Take a look at the charts section below for an overlay of Chi-PMI and ISM.  The long term similarities are among the reasons Chicago PMI has even grown to matter as much as it has--and why it's bigger beats/misses tend to have noticeable effects.

That said, a big move in Chi-PMI doesn't guarantee a big move in ISM.  It may tips the scales a bit though--at least enough to make the current consensus of 55.0 seem a bit low (55.0 was the exact same forecast for Chi-PMI, which subsequently came in at 65.9).  One thing's for sure: if ISM stages a similar performance, something's up

Charts