Thursday, October 1, 2015

Weak markets on mixed economic data

Dow dropped 71, advancers over decliners almost 3-2 & NAZ lost 17.  The MLP index shot up another 11+ to the 314s & the REIT index edged up 1+ to the 305s.  Junk bond funds remained weak & Treasuries fluctuated.  Oil had a big gain, rising above the mid 45s where it has been stuck for more than a month, & gold was flattish.

AMJ (Alerian MLP Index tracking fund)

CLX15.NYM...Crude Oil Nov 15...46.97 Up ...1.88 (4.2%)

GCV15.CMX...Gold Oct 15......1,117.40 Up ...1.90 (0.2%)

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American manufacturing stagnated in Sep as a stronger dollar & faltering overseas markets led to the slowest pace of orders since Nov 2012.  The Institute for Supply Management’s factory index decreased to 50.2, the 3rd straight decline & the weakest since May 2013, from 51.1 the prior month.  50 is the dividing line between expansion & contraction.  The forecast called 50.6.  Export demand matched the weakest since Jul 2012 as economies from China to the euro area struggle to improve.  While resilient spending by US consumers is helping underpin manufacturing, the stronger dollar is making it more expensive for foreign buyers to purchase made-in-America merchandise.  The measure of new orders dropped to 50.1 last month from 51.7, while the production gauge decreased to 51.8 from 53.6 in Aug.  The export orders index held at 46.5.  The measure of factory employment declined to 50.5 from 51.2 the previous month & the prices paid index fell to 38 from 39.  The inventory gauge was unchanged at 48.5.  Figures less than 50 means stockpiles are shrinking.  Like the ISM report, regional factory surveys have deteriorated over the last several weeks, fueling concerns that intl threats to growth are spreading to US shores.  7 of these surveys were released over the course of Sep & all pointed to shrinking manufacturing.

Manufacturing in U.S. Deteriorates on Weaker Global Demand

China’s official factory gauge stabilized around a 3-year low as gov stimulus measures showed signs of steadying the weakness in manufacturing.  The official purchasing managers index climbed to 49.8 in Sep, according to the National Bureau of Statistics, compared with the estimate of 49.7 (also the level in Aug).  Readings below 50 indicate contraction.  A separate PMI gauge from Caixin Media & Markit Economics also showed improvement from its initial reading, with the final Sep number climbing to 47.2.  The reports signal that 5 central bank interest-rate cuts since Nov & the gov unleashing new rounds of infrastructure spending are gaining traction, helping to cushion the economy.  Still, excess capacity & factory-gate deflation are pressuring China’s manufacturers, adding headwinds for the gov 2015 growth objective of about 7%.

Sep PMI readings have been higher in all but one of the past 10 years, & last month’s matched the 49.8 from Sep 2012.  The is reading remaining below the usual level for the month shows "relatively weak domestic and external demand," according to a statement released by NBS statisticians.  The gov non-manufacturing PMI reading for Sep was unchanged at 53.4, reflecting the relatively stronger performance of services industries throughout the economic slowdown.  New export orders for services jumped to 51.1 from 46.6.

China’s Official Factory Gauge Stabilizes Near 3-Year Low

Fiat Chrysler Automobiles (FCAU) kept its monthly sales streak alive as US deliveries rose 14% in Sep, powered by Jeep’s 40%.  GM (GM), Ford (F) & Nissan beat estimates, while GM & FCAU projected a faster sales pace than the industry has seen in a decade.  FCAU reported sales of 193K vehicles, matching the estimate.  Jeep sport utility vehicles, led by a record for Cherokee, had their 2nd best month ever as Fiat Chrysler deliveries gained for the 66th straight month.  GM sales rose 12%, exceeding estimates for a 9.3% gain, while Ford’s light-vehicle deliveries jumped 23%, topping projections for a 19% increase.  Nissan sales increased 18%, compared with a 13% estimate.  The industry may show a 13% jump in car & light-truck deliveries for an annualized rate, adjusted for seasonal trends, of 17.7M.  FCAU forecast an 18.4M pace for the month, including medium & heavy trucks that typically account for at least 200K deliveries. GM projected an 18.3M pace for light vehicles, the fastest selling rate since Jul 2005, when is reached 20.9M.  GM said sales rose to 251K.  Nissan set a Sep sales record, driven by a 45% jump in sales of the Rogue small utility.  Other projected Sep sales gains include 16% for Toyota (TM) & 13% for Honda.  Volkswagen, including Audi, is likely to be the odd one out:  Analysts are evenly split between those who predict a decline or a gain.  Volkswagen is the subject of numerous gov investigations & lawsuits since the EPA said Sep 18 that it admitted using a defeat device that turned off emissions controls when vehicles weren’t being put through official tests. 

Auto Sales Trounce Estimates

Early economic data signals in the US are so-so for Sep, at best.  China data continues ot be mediocre.  A gov shutdown has been postponed for a couple of months.  But a looming rate hike still spooks traders.  Tensions in the MidEast have risen sharply as Russia as taken control of the area from America.  That can be a major worry for the stock market.  The MLP index jumped again today (up an amazing 36 in just 2 days).  Other yield stocks haven't done well.  Junk bond funds have been sold for weeks & the REIT index is where it was 2 years ago.  All is not well in the stock market as it enters the famous month of Oct.

Dow Jones Industrials

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