Tuesday, April 1, 2014

Markets rise on manufacturing data

Dow gained 66, advancers over decliners 3-2 & NAZ jumped 50.  The MLP index went up 1 to the 466s (flirting with a new record although flattish for the last year) & the REIT index slipped 1 to the 284s.  Junk bond funds did little & Treasuries were sold.  Oil & gold slid back.

AMJ (Alerian MLP Index tracking fund)

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CLK14.NYM...Crude Oil May 14...101.06 Down ...0.52  (0.5%)

GCJ14.CMX....Gold Apr 14........1,283.50 Up ....0.10 (0.0%)

The Institute for Supply Management index increased to 53.7, but less than projected, from 53.2 a month earlier. Readings above 50 indicate growth. The forecast was 54.  Production picked up last month as temperatures warmed & suppliers had greater success making deliveries of parts to factories.  Stronger consumer spending along with a rebound in business equipment purchases would help keep factories humming & provide a bigger source of strength for the economy.  The ISM’s gauge of new orders climbed to 55.1 from 54.5 in Feb.  The index of orders waiting to be filled jumped to 57.5, the highest since Apr 2011, from 52.  An index of production surged to 55.9 from 48.2 the prior month.  However, the factory employment measure declined to 51.1, the lowest since Jun, from 52.3,

U.S. ISM Manufacturing Index Rose to 53.7 in March From 53.2

Chinese manufacturing gauges pointed to weakness that could prompt the Communist Party leadership to roll out additional support measures.  The Purchasing Managers' Index fell to 48 in Mar, the lowest since Jul, from 48.5 in Feb, HSBC Holdings & Markit Economics said.  A separate PMI from the gov, with a larger sample size, was at 50.3 from 50.2 the previous month.  The reports underscore what Premier Li Keqiang last week called “difficulties and risks” as he tries to control surging debt, default dangers & pollution that threatens to stoke public discontent.  Li said the nation has policies in reserve to support economic growth after the cabinet said it would accelerate construction spending.  Li said last week he was confident China will keep economic growth in a “reasonable range.”  The nation will gradually introduce “powerful” measures, including speeding up construction of key investment projects & building railways, roads & irrigation infrastructure, he added.  Analysts are split over whether the central bank will cut banks’ reserve requirements for the first time since May 2012.  While today’s official PMI was the lowest for Mar in figures dating to 2005, a sub-index of new export orders rose to 50.1 from 48.2, indicating the first expansion since Nov.

China Manufacturing Index Little Changed in March

Apple Leads U.S. Companies Holding Record $1.64 Trillion in Cash
Photo:   Bloomberg

US companies outside of the finance industry are holding more cash on their balance sheets than ever, with $1.6T at the end of 2013.  That’s up 12% from the prior record in 2012, according to Moody’s.  Technology led the charge, with  Apple (AAPL), Microsoft (MSFT - a Dow stock), Google (GOOG) & Verizon (VZ - another Dow stock) topping the list of cash-rich companies.  Stockpiling cash can help companies maintain stronger credit ratings & ensure near-term debt can be paid off if there are swings or disruptions in capital markets.  High levels of cash can also attract activist shareholders, who can weaken a company’s credit rating, or encourage companies to make risky decisions, such as expensive acquisitions.  Cash  at AAPL surged to $159B from $5.4B in 2004, now holds 9.7% of total corp cash outside the financial industry.  The company, which reinstated divs in 2012, was targeted for not returning enough cash to shareholders.  Technology companies held $309B more in cash at the end of last year than they did in 2009, accounting for 53% of the increase for all non-finance companies.  Firms in the technology industry kept $450B overseas, 47% of the total corp cash held outside the US.  Companies have been putting money in low-tax countries, taking advantage of loopholes in the US tax code.  Capital spending of $869B & div payouts of $365B reached 7-year highs last year, while share repurchases & acquisition spending declined, according to Moody’s.

U.S. Firms Hold Record $1.64 Trillion in Cash With Apple in Lead

Stocks got good news about manufacturing & buyers came out.   Dow is within 50 of setting a new record after the S&P 500 reached a new record yesterday.  Initial economic reports this week are expected to be favorable. The Mar jobs report on Fri should be encouraging, although better economic news can give the Federal Reserve courage to make bigger reductions in its bond buying program. 

Dow Jones Industrials

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