Tuesday, September 2, 2014

Markets fluctuate amid August manufacturing data

Dow added 6, advancers slightly ahead of decliners & NAZ gained 15.  The MLP index slid a fraction in the 539s & the REIT index was off pennies in the 311s.  Junk bond funds were mixed & Treasuries saw selling, taking the yield on the 10 year Treasury over 2.4%.  Oil started the month with a strong rebound & gold fell back.

AMJ (Alerian MLP Index tracking fund)

CLV14.NYM...Crude Oil Oct 14...95.96 Up ...1.29 (1.4%)

GCQ15.CMX...Gold Aug 15....1,281.20 Down ...9.20  (0.7%)

Manufacturing in U.S. Expands at Fastest Pace in Three Years
Photo:   Bloomberg in Ju

Manufacturing expanded in Aug at the fastest pace in 3 years as orders grew by the most in a decade, showing US factories may help power the economy into Q3.  The Institute for Supply Management’s index unexpectedly climbed to 59, the highest level since Mar 2011, from 57.1 in Jul.  Readings greater than 50 indicate growth.  The  forecast was for 57.  A drive to update plants & equipment is propelling gains in business investment that will probably keep American factories busy even as consumer spending shows signs of cooling.  Better wage growth could broaden household purchases beyond automobiles & help sustain the pickup in manufacturing, which makes up 12% of the economy.  The news on manufacturing was less positive overseas as UK factory growth slowed more than forecast last month & Italian manufacturing shrank as Europe suffered the fallout from weakening demand & mounting geopolitical risks.  The increase in the ISM index came as the group’s new orders gauge climbed to 66.7, the highest since Apr 2004.  The production gauge rose to the strongest since May 2010, reaching 64.5 from 61.2 the prior month & the measure of orders waiting to be filled climbed to 52.5 from 49.5.  The report also showed gauges of factory inventories & customer stockpiles both advanced in Aug from a month earlier.  The group’s factory employment measure was little changed at 58.1 compared with a 3-year high of 58.2 the prior month.  The figures follow data last week that showed the economy expanded at a 4.2% annualized pace in Q2 after shrinking 2.1% in Q1.

U.S. Manufacturing Grows at Fastest Pace in Three Years

The Markit Economics final Aug index of US manufacturing rose to 57.9, the highest level since Apr 2010, from 55.8 the month before as orders & factory employment picked up.  Readings exceeding 50 in the purchasing managers’ gauge indicate expansion.  The forecast was for 58.  The orders measure increased to 60.5 from 59.5 in Jul & employment grew at a faster pace.  “The latest survey points to the fastest upturn in payroll numbers for around a year-and-a-half, highlighting that the manufacturing sector continues to have a positive impact on overall labor market conditions,” Tim Moore, a senior 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 57.9 From 55.8

Russia stepped up its criticism of the US over Ukraine as pres Obama heads to eastern Europe to reassure NATO members of their security.  Russian Foreign Minister Lavrov said Ukraine’s allies are stoking the 5-month conflict & should back peace talks, even as pres Putin sought to calm concern over remarks his army could “take Kiev” in a matter of weeks.  The Ukrainian Defense Minister said defenses must be strengthened in the face of a “full-scale invasion” by Russia.  “Unfortunately, the rise of the ‘party of war’ in Ukraine is being actively encouraged by Washington and some European capitals and more and more frequently from NATO headquarters in Brussels,” Lavrov said.  Ukraine, the US & Europe accuse Russia of dispatching soldiers & backing militias to open a new front.  Russia, which is facing further sanctions as early as this week over the unrest, has repeatedly denied involvement.  Obama will visit Estonia, on his way to this week’s NATO summit in the UK.  Lavrov said any move by Ukraine to join NATO would upset peace talks that are due to continue Sep 5 in Minsk.  Obama is scheduled to meet the leaders of Estonia, Latvia & Lithuania, 3 former Soviet republics that are now part of the military alliance.  He’ll then head on to the NATO gathering amid the Ukrainian conflict & an escalating threat from Islamic extremists in Iraq & Syria.

Russia Accuses U.S. of Stoking Ukraine Conflict as Obama Heads to Region

Stocks have had pretty much a straight up run in the last few weeks while many were away on holiday.  Nothing new is getting decided today.  Aug economic data reported this week should be favorable.  But the intl scene remains a mess, starting with the Ukraine.  NATO will not take any meaningful action.  On the US front, while manufacturing data is looking better consumer spending.remains spotty.  The big jobs reports is due on Fri, but it should not have negative surprises.

Dow Jones Industrials

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