Today's economic data

The ISM manufacturing index rose, almost exactly as expected.

The bulls will see this as verification of the belief that the economy is pulling sharply out of its June swoon.

Bob Brusca is not so sure. He lines up the performance of ISM components with other indicators of factory strength and finds not a ton of correlation:

"The correlations seem best in explaining acceleration: changes in the growth rate for durables (not the growth rate itself). It is best at explaining shipments, and second best at orders, poor at inventories and irrelevant in explaining changes in unfilled orders. The ISM correlates best with durable goods industries rather than all factories.

"This is simply anther way to make the warning I often do: Breadth is not strength."

In other words, the ISM is a diffusion index. It tells you how many firms are feeling better, but it doesn't tell you anything about how much better they're feeling.

For that reason, we should also discount the fact that the ISM employment index fell in July. What's good for the bull is good for the bear.

Speaking of bears, David Rosenberg at Merrill Lynch has this to say of the 2Q GDP numbers:

"With corporate earnings set to moderate in the second half of the year, capital spending, while remaining a relative outperformer, will still moderate going forward. Inventories added 0.2 percentage points to the GDP number and there were huge back-revisions to the data — but with sales softening we would look for the re-stocking process to, at best, be neutral for GDP growth through the balance of the year.

"As we saw this week, order books are slowing down, not speeding up, and if CEO's have a Bloomberg on their desk with the World Equity Index page as their default, the negative action in the equity market is unlikely to cause them to go out and add to inventory.

"The consensus of economists might be bullish, but the equity markets at least picks the 12-month trend in GDP accurately more than 70% of the time and it's pointing in a different direction right now."

More to come, obviously.