Tuesday, July 1, 2014

Markets rally on manufacturing data

Dow jumped 113, advancers over decliners 5-2 & NAZ added 46.  The MLP index was fractionally higher in the 524s & the REIT index rose a fraction to the 303s.  Junk bond funds were mixed & Treasuries retreated after their recent rally.  Oil rose for the first time in 4 days on speculation that a gov report tomorrow will show that US crude inventories dropped last week & gold reached the highest level in more than 3 months..

AMJ (Alerian MLP Index tracking fund)

CLQ14.NYM...Crude Oil Aug 14...105.82 Up ...0.45 (0.4%)

GCN14.CMX...Gold Jul 14.........1,331.40 Up ...9.60 (0.7%)

The Markit Economics index of US manufacturing increased to 57.3 in Jun, the highest in more than 4 years, from 56.4 a month earlier.  Readings exceeding 50 in the purchasing managers’ gauge indicate expansion.  The forecast was 57.5, with estimates ranging from 57 to 57.7 & the preliminary reading was 57.5.  The measure of production increased to 61, the highest since Apr 2010, from 59.6.  The pace of orders also picked up.  “Factory output, order books and payroll numbers rose at some of the fastest rates we’ve seen since the recession, rounding off the best quarter for four years in terms of manufacturing expansion,” the chief economist at Markit said.  The Markit measure is based on a poll of more than 600 American manufacturers, with a response rate of 85-90%.

Markit Manufacturing Index in U.S. Increases to 57.3 From 56.4

German unemployment unexpectedly increased for a 2nd month amid signs of a slowdown in Europe's largest economy.  The number out of work rose a seasonally adjusted 9K to 2.916M in Jun.  Economists forecasted a decline of 10K.  The adjusted jobless rate was unchanged at 6.7%, the lowest level in more than 2 decades.  While Germany has led the euro area’s economic recovery this year, business confidence declined in Jun to the weakest level this year & ZEW investor sentiment unexpectedly dropped for a 6th month.  The Bundesbank said last month that economic growth probably slowed in Q2 after unusually warm weather boosted output in Q1.  The German economy expanded 0.8% in Q1, twice as fast as in Q4 & 4X the euro area as a whole.

German Unemployment Unexpectedly Rises for Second Month

General Motors (GM) surprised with a US sales gain in Jun after analysts projected a decline.  Ford (F), Chrysler Group & Nissan all beat estimates in what’s shaping up to be a big month for the industry.  Chrysler’s sales rose 9.2%, the company’s 51st consecutive monthly increase, while GM reported gains of 1%, beating the estimate for a 6.3% decline.  Ford’s light-vehicle sales decreased 5.8%, better then the estimate for 6.6% decline.  Aided by available credit & an improving economy with housing starts that remained near 1M in May, auto sales are headed for the biggest year since 16.15M vehicles were sold in 2007.  Adjusting for seasonal trends, US auto sales may have accelerated to an annualized pace of 16.3M in Jun from 15.9M a year earlier.  GM forecast a light-vehicle selling rate of 16.6M.  Chrysler projected a pace of 17M, including medium-duty & heavy trucks, which typically account for at least 200K sales a year.  Toyota (TM) sales rose 3.3%, less than the estimate of 3.5%.  GM sold 267K vehicles, helped by redesigned large SUV sales such as the Chevrolet Tahoe, & Chrysler delivered 171K cars & light trucks, aided by a Jeep brand sales gain of 28%.  GM faced a difficult Jun with the release of an internal investigation that found a lack of urgency in the engineering & legal departments led to GM taking more than a decade to recall flawed small cars linked to at least 13 deaths.  CEO Mary Barra returned to Congress for additional testimony & the company continued its stepped-up pace of recalls with the total reaching almost 29M in North America.  Nissan sales rose 5.3%, topping estimates for a gain of 3%.  Ford’s light-vehicles sales declined to 221K as F-Series pickup & Taurus sedan deliveries fell 11% & 30% respectively.  Chrysler’s namesake brand fell 12% to 24K.  The new 200 family sedan sold more than 5K, up from 595 in May.  Honda may report a drop of 5.8%, while combined Hyundai & Kai sales are projected to slide 2.4%.

Chrysler’s U.S. Sales Beat Estimates as Big Month Seen

Stocks are starting the new month with the buyers in command.  Auto sales were sort of good, though that was uneven, & manufacturing data was encouraging.  Dow is nearing the magical 17K ceiling which it has been trying to crack thru for almost a month.  Maybe this time it will succeed if intl events & "phoney" scandals don't get in the way..

Dow Jones Industrials

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