The Dow Jones Industrial Average (^DJI 0.42%) inched further into record territory today, breaching 16,740 points. Meanwhile, the S&P 500 (^GSPC -0.37%) was flat after hitting a record close on Friday.
Confusing manufacturing data
The broad movements higher were dampened by the Institute for Supply Management's manufacturing report, released this morning.
The ISM index measures the expansion or contraction of productivity in the manufacturing sector. A reading above 50 indicates expansion, while anything below that point indicates contraction. This morning's first reading came in at 53.2%, the lowest level since February and down from April's 54.9%.
Later in the morning, though, the ISM revised the number higher to 56%, citing a software mistake that applied April's seasonal adjustments onto the May numbers. Economists were expecting 55.5%, so this revision was much more in line with forecasts.
Then, in early afternoon trading, the ISM again revised the numbers. This latest revision put the index at 55.4%.
Confused yet?
To sum things up, the ISM Manufacturing numbers today indicate that manufacturing in the U.S. is growing. That much is clear. Whether that growth is at, above, or below expectations remains debatable. It depends on which version of the numbers you happen to believe, assuming any of them are accurate at all.
Don't forget, its jobs week
This Friday, investors and economists will see the monthly employment numbers for May. The unemployment rate, perhaps the most simplistic of labor market measures, has clearly been improving for over five years now. It's a hugely significant data point, because more Americans with jobs correlates to more Americans spending money and driving the overall economy.
US Unemployment Rate data by YCharts.
The long-term trend in economic improvement notwithstanding, recent economic releases have tended to be reasonable numbers that disappoint economist expectations.
First there was the underwhelming first-quarter GDP figure, which showed negative growth for the first time in years. Then there was the continued weakness in the housing market. And of course there was today's twice-revised manufacturing data.
Each disappointment has failed to concern the markets, as both the Dow and S&P have moved from record high to record high. Each report is an anomaly; there's always an excuse.
In the world of economic data, arguably no area matters as much as the labor market.
What if the general weakness reported across the economy catches up to the labor market this month? What if the unemployment rate reverses its improving trend, even if temporarily? What if all the excuses turned out to be wrong? What if something really is amiss in the economy?
Contemplating the worst
Fellow Fools Morgan Housel and Dan Caplinger have written time and again that investors should not focus on economic reports when making investments. Pay a little attention to the multiyear trends, but generally ignore anything more short-term than that.
I tend to think they are right. Buying a rock-solid stock when the economy is in a down cycle is probably a great idea; it's still a rock solid company, and it's probably cheap.
So what would a really ugly jobs report mean to you as an investor this month? Generally speaking, it shouldn't mean anything at all. Nothing. Nada.
That said, it could mean that a buying opportunity is just around the corner. When group psychology trumps reason and the broad markets move lower based on macroeconomic conditions or fear, this presents a fantastic opportunity to buy the best companies for cheap.
The Dow and S&P today are once again flirting with record highs. Don't panic if this bull run takes a breather or even retreats for a time. Today we are investing in an unprecedented environment. We are just a few short years past a generational economic crisis. The Federal Reserve is deploying brand-new and untested monetary policies.
But don't sell your stocks in a panic just because some economic data disappoints or confuses. Play it cool, buy strong companies for cheap, and be greedy when everyone else is fearful.
