Economic activity in manufacturing continued to expand in October, according to the Institute for Supply Management, with 14 consecutive months of growth and consistent with pre-hurricane levels.  While PMI for October dropped to 58.7 from an unrevised 60.8 in September, overall manufacturing is on solid footing and likely just taking a breather after reaching the highest read since May 2004. “Comments from the panel reflect expanding business conditions, with new orders, production, employment, order backlogs and export orders all continuing to grow in October, supplier deliveries continuing to slow (improving) and inventories contracting during the period.”

Highlights from the ISM:

• The New Orders Index decreased to 64.3 from 64.6.
• The Production Index dropped to 61 from 62.2.
• The Employment Index fell to 59.8 from 60.3.
• The Prices Index declined to 68.5 from 71.5 due to higher material costs for the 20^th consecutive month.
• The Inventories Index slipped back into contraction (a read below 50) after declining to 48.0 from 52.5 due to production and delivery delays.
• Of the 18 manufacturing industries, 16 reported growth in October.
• Annualized, the October read would equate to a 4.9% increase in annual real GDP. 

On the jobs front, according to ADP, 235,000 jobs were added in October versus expectations for a gain of 200,000 jobs.  Now all eyes will be on the monthly jobs report on Friday. 

I think news of a 4th tax rate of 39.6% is slowing the rally. A higher threshold is going to hurt businesses and others with investable cash - the kind needed to spark entrepreneurship and small business funding. 

Let’s keep our powder dry this afternoon.