Stocks Whistle Past the Graveyard After Weak Manufacturing Data

This morning, in the wake of a truly hideous report on the Midwestern manufacturing economy, the stock market took a sharp jog lower. And then, against all good sense, jumped higher.

The Chicago Purchasing Managers index, or PMI, dropped to 38 in July from 44.4 in June, a far greater pullback than economists had expected. The report put the kibosh on recent optimism that the region's manufacturing base, dominated by the auto industry, had begun to find its footing. Yet in the equity arena, traders chose not to dwell on the bad news, focusing instead on a belief that the report opens the door to a half-point cut at Federal Open Market Committee's meeting three weeks from today.

That belief is unfounded.

In testimony before Congress two weeks ago, Fed Chairman Alan Greenspan signaled that, absent some disaster, the Committee won't be taking down rates at the half-point clip seen earlier this year. ...