Thursday, June 1, 2017

Markets rise on manufacturing data

Dow went up 20, advancers over decliners 5-2 & NAZ added 7.  The MLP index gained 2+ to the 302s & the REIT index was fractionally lower to the 344s.  Junk bond funds edged higher & Treasuries retreated.  Oil rose pennies in the 48s & gold declined to 1266.

AMJ (Alerian MLP Index tracking fund)

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American factories are settling back into a solid pace of expansion after a post-election run-up that saw the Institute for Supply Management manufacturing gauge hit an almost 3-year high.  Factory index little changed at 54.9 (est. 54.8) from 54.8 in Apr (readings above 50 indicate growth).  ISM's gauge of new orders increased to 59.5 from 57.5.  Measure of production eased, while employment index picked up.  Stronger orders growth represents resilient sales that will keep manufacturing driving forward.  Factory managers have registered more optimism about conditions so far in 2017 amid steady domestic demand & global growth that looks more promising.  ISM's employment figures are consistent with projections that the Labor Dept tomorrow will report a pickup in factory payrolls.  Stable overseas demand is helping to keep a floor under export orders.  The Chinese gov Purchasing Managers’ Index showed expansion in May for a 10th month after shrinking in most of the prior 10 months.  The ISM figures indicate manufacturing growth is staying robust even as expectations fade for a near-term fiscal boost, including thru tax reform, from DC lawmakers.

Manufacturing in U.S. Settles In at Solid Pace of Expansion

US construction fell in Apr by the largest amount in a year, reflecting weakness in homebuilding, non-residential construction & gov projects.  The Commerce Dept reports that construction spending fell 1.4%, the biggest drop since a 2.9% fall in one year.  The decline left spending at a seasonally adjusted annual rate of $1.22T.  The report was significantly weaker than analysts had expected & represented the first monthly decline since a small 0.2% drop in Dec.  The forecast called for an increase of about 0.5%.  The big decline followed a revised 1.1% increase in Mar, which had pushed construction spending to a record high of $1.24T,
More people sought unemployment benefits last week, the 2nd straight week of increases, though levels remain historically low.  The Labor Dept says applications for weekly unemployment aid rose 13K to 248K.  The 4-week average, a less volatile figure, rose 2K to 238K.  Applications are a close indication of layoffs.  They have been below 300K, a historically low figure, for 117 weeks (the longest streak since 1970).  The ultra-low figures add to evidence that companies are holding onto workers & hiring at a steady pace.  Americans are spending more, factories have cranked up output & home sales are strong, boosting the economy after it barely expanded in the first 3 months of the year.

US jobless claims rose to 248,000 last week

Traders are waiting to see what Trump will do about the Paris accord.  Early economic data is favorable & the report on new jobs in May, coming tomorrow, should be reasonably good.  Meanwhile the craziness in DC continues & that could indicate Congress will not much done in the coming months.  But NAZ is back in record territory while Dow is within striking distanjce of setting a new record.

Dow Jones Industrials

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