Tuesday, September 3, 2013

Higher markets on US manufacturing growth

Dow shot up 96. advancers over decliners a muted 2-1 & NAZ rose 42.  The MLP index edged up a fraction to 438 & the REIT index was off 2+ to the 258s.  Junk bond funds were mixed & Treasuries sold off with the yield on the 10 year Treasury back at 2.9%.  Oil rose on higher tensions in the MidEast & gold sneaked back over 1400.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLV13.NYM...Crude Oil Oct 13...107.08 Down ...0.57  (0.5%)

GCU13.CMX...Gold Sep 13...1,399.50 Up ...3.40 (0.2%)

Workers assemble built-in appliances at the Whirlpool manufacturing plant in Cleveland, Tennessee August 21, 2013. REUTERS/Chris Berry

Photo:   Yahoo

The US manufacturing sector grew last month at its fastest pace in more than 2 years, bolstering expectations for faster overall growth in H2.  The Institute for Supply Management (ISM) said its index of national factory activity rose to 55.7 in Aug from 55.4 the prior month, comfortably beating expectations for 54.  It was the highest reading since Jun 2011.  A reading above 50 indicates expansion in the sector.  New orders also marked their best level in more than 2 years, with that sub-index jumping to 63.2 from 58.3.  Employment, however, slipped to 53.3 from 54.4.  The gov will release its Aug employment report on Fri & the forecast is that employers added 180K new jobs last month after hiring 162K workers in Jul.  Manufacturing has been hurt this year by cuts in gov spending & weaker global demand, causing the sector to shrink in May.  But sizable increases in activity in Jul & Aug are adding to views that US goods-producing companies are finding their footing as the year wears on.  Data last week showed the economy grew at a quicker-than-expected pace in Q2 & should continue to gain momentum.

U.S. ISM Manufacturing Index Rose to 55.7 in August From 55.4

Construction spending in the US increased in Jul to the highest level in 4 years, propelled by gains in residential real estate.  Outlays climbed 0.6% to a $901B annual rate, the most since Jun 2009, after being little changed in Jun according to the Commerce Dept.  The forecast called for a 0.4% increase.  Gains in employment, housing & non-residential building in H2 will probably help strengthen the economic expansion.  Nonetheless, tight land inventories, rising mortgage rates may temper the pace of the industry’s recovery.  Figures for May were also revised up.  Construction spending increased 5.2% in the 12 months ending Jul according to Commerce Dept data.  Private home building outlays increased 0.6% to the highest level in 5 years.  The gain included a 0.8% increase in home improvement from Jun.  Non-residential building climbed 1.3%, reflecting a jump in factory construction.  But outlays on public projects dropped 0.3%.  Federal spending increased 1.1%, the biggest gain since Oct, while state & local declined 0.4%.  Construction helped the economy pick up steam in Q2 as GDP increased at a more-than-expected 2.5% annualized rate after a 1.1% gain in Q1.  Residential construction increased at a 12.9% annualized rate.

Construction Spending in U.S. Climbed in July to Four-Year High

Microsoft Corp. CEO Steve Ballmer

Photo:   Bloomberg

Microsoft, a Dow stock, agreed to buy Nokia's handset unit & license its patents for €5.4B ($7.2B), seeking to revive 2 smartphone businesses that have struggled for a half-decade to gain market share.  The devices & services unit, which accounted for half of Nokia’s 2012 revenue, along with 32K employees, will transfer to MSFT in its biggest foray into hardware as sliding PC sales threaten demand for Windows.  The all-cash transaction, subject to Nokia investors’ approval, is expected to be completed in Q1 of 2014.  “It’s a big transformation, but that’s what you’ve got to do in the tech business to move forward,” MSFT CEO Steve Ballmer said.  The stock fell 1.81.

Microsoft Buys Nokia Handset Unit for $7.2 Billion to Catch Up With Apple

Microsoft (MSFT)

stock chart

This  is a lazy kind of first trading day in the new month.  Traders are returning after holidays & vacations, & their gut reactions are to buy stocks although market breadth is not encouraging.  Favorable economic data is also being digested by the biggies at the Federal Reserve & will be part of their decisions at the FOMC meeting in 2 weeks on what to do with interest rates   Higher rates are coming.  Meanwhile politicos in DC will very busy trying to figure out what to do about Syria.  Then there is the budget mess, funding next year's spending, & raising the debt ceiling.  All that uncertainty may not be baked into the markets.

Dow Jones Industrials

stock chart 

No comments: