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Tuesday, December 1, 2015
Markets pare gains after economic data is reported
Dow climbed 62, advancers over decliners almost 2-1 & NAZ gained 15. The MLP index slid back pennies below 301 the REIT index went up 2+ to the 329s. Junk bond funds were mixed & Treasuries rose. Oil & gold crawled higher.
US manufacturing unexpectedly contracted in Nov at the
fastest pace since the last recession as elevated inventories led to
cutbacks in orders & production. The Institute for Supply Management’s index dropped to 48.6, the lowest level since Jun 2009, from 50.1 in Oct. The Nov
figure was weaker than the most pessimistic forecast. Readings less than 50 indicate contraction. The report showed factories believed their customers continued to
have too many goods on hand, indicating it will take time for orders &
production to stabilize. Manufacturers, which account for almost 12% of the economy, are also battling weak global demand, an
appreciating dollar & less capital spending in the energy sector. The forecast called for an ISM reading of 50.5. Globally, results were mixed last
month. While factory conditions in China were the weakest in more than 3 years, manufacturing strengthened in the euro area & cooled in
the UK from a 16-month high.
Figures from Markit Economics showed US manufacturing continued to
expand in Nov, although at a slower pace. The US ISM group’s production measure dropped to 49.2 from 52.9 in Oct & new orders fell to 48.9 in Nov from 52.9. Both were the weakest since Aug 2012. The index of
export orders held at 47.5 in Nov, the 6th month of contraction. Factories in Nov made more progress than their customers in
reducing inventories. The stockpile gauge at the nation’s producers
dropped to 43, the lowest level since the end of 2012. An index of customer inventories was little changed at 50.5 after 51 a
month earlier, marking the 4th straight month above 50, the
longest such stretch during an economic expansion since Oct 2006
thru Feb 2007.
Consumer spending at brick-&-mortar retail locations fell 10% over the 4-day Thanksgiving weekend as US retailers cut store hours on the holiday, according to ShopperTrak. Spending over the period totaled $20.4B. Along
with the decline in Thanksgiving-day store openings, retailers also
rolled out discounts earlier this year, rather than reserving them for
Black Friday. That put less pressure on consumers to seek discounts
after their turkey dinners. ShopperTrak maintained its forecast that
brick-&-mortar sales will rise 2.4% this holiday season. Spending habits have changed, too, as more people buy
services & experiences like manicures & restaurant dinners as gifts.
They’ve also chosen to do more of their shopping online, a trend that
could spell trouble for malls trying to counter slowing traffic.
China’s manufacturing conditions slipped to the weakest level in more
than 3 years as sluggishness in the nation’s old growth drivers add
to risks facing the gov growth target. The official purchasing managers index fell to 49.6 in Nov, the
National Bureau of Statistics said, the lowest level since
Aug 2012. That compared with an estimate of 49.8, which was also the level for Sep &
Oct. The non-manufacturing PMI rose to 53.6 from 53.1 a month
earlier. Numbers below 50 indicate deterioration. 6
central bank interest-rate cuts since Nov last year haven’t been
enough to spur a recovery in manufacturing, which has continued to
weaken while activity in the services sector has shown more strength.
Premier Li Keqiang’s goal of about 7% expansion for 2015 is at
risk, even as employment has held up thanks to resilience the in
services & consumption. Another
manufacturing PMI released by Caixin Media & Markit Economics edged
up to 48.6 in Nov, exceeding the median estimate of 48.3. The gauge
has a smaller sample size & includes smaller companies & exporters.
Readings
of output, new orders, inventories & employment all weakened from
Oct. Input prices for
raw materials slumped to the lowest point this year, according to an NBS
statement. A range of private indicators for Nov had suggested conditions remained weak for China’s
industrial sector. A privately compiled PMI & a gauge based on search
engine interest in small & medium-sized businesses deteriorated last
month, while a sentiment indicator dropped sharply from Oct. A PMI reading for the steel industry slumped to 37 in Nov.
Dow pulled back 100 from its highs before the economic data was reported. The first day of a new month tends to bring out buyers, but that may not be the case today. However Dow remains up a massive 1.5K in Q4.
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