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April 30, 2012 at 16:44 PM EDT
Over recent weeks, we’ve been concerned about seepage of European contagion and American consumer constraint infecting the American manufacturing sector. The trend of the latest flow of regional manufacturing measures seems to concur. The Chicago Purchasing Managers Index (PMI) was reported down in April. The survey of business managers fell to a 29-week low reading of 56.2, down relatively sharply from March’s level of 62.2. The details show that production, new orders and inventories were lower. Employment improved but the segment is a lagging economic indicator.
Industrial SoftnessMeanwhile, the Dallas Federal Reserve Bank reported its Manufacturing Survey Monday. Manufacturing activity slowed in the important state of Texas, which accounts for 9% of U.S. manufacturing production. The relative production index declined to +5.6 from +11.1 previously. Capacity utilization dropped dramatically, with a quarter of all respondents reporting decreases. New orders and shipments were both flat, reflecting the malaise seen in the Midwest measure. The regional Business Activity Index fell into negative territory in April, and surveyed managers mostly reported a deteriorated outlook.
Tuesday offers the latest Manufacturing Index Report from the Institute for Supply Management. The national measure of manufacturing was disappointing from my perspective last month. This month has economists’ expectations set low, with the Business Activity Index seen marking 53.0, which would be a decrease from March’s 53.4 reading. The range of expectations extends from 52.0 to 54.4, and the trend seems to reflect at best a flattening, stagnant environment, and at worst, the precipice of a cliff’s edge.
Other regional indices have mirrored the morose message conveyed today. Last week, the Kansas City Fed published its manufacturing index, which produced a decline to a reading of 3, down from 9 in March and 13 in February. The bank of Richmond produced an improvement in April, with its regional measure rising to 14 from 7 the month before. However, the more widely followed Philadelphia and New York measures marked declines the week before. Philadelphia’s measure fell to 8.5 from 12.5, and New York dropped to 6.6 from 20 the month before. Each of these continues to reflect economic expansion, but it is generally seen at a slower pace. Most of the indexes are benefiting from rising employment, though this is a lagging economic indicator.
Recent declines in data out of Europe and China have many questioning the support of the global environment, which has been important in times of domestic question. Stocks are down on today’s data, following a market ride set forward by Apple Inc. (Nasdaq: AAPL) and Amazon.com (Nasdaq: AMZN) last week. At the close of trading, the SPDR Dow Jones Industrial Average (NYSE: DIA), SPDR S&P 500 (NYSE: SPY) and the PowerShares QQQ (Nasdaq: QQQ) were each in the red. The Industrial Select Sector SPDR (NYSE: XLI) was off even more, down about 0.9% on the day. Given the trend developing and indicated by the regional manufacturing reports, I think the industrials are lower for good reason, and we advised against them about a month ago. The top ten holdings of the XLI were down big Monday, with General Electric (NYSE: GE) cut 1.0%, United Parcel Service (NYSE: UPS) lower by 0.4%, United Technologies (NYSE: UTX) down 0.4%, Caterpillar (NYSE: CAT) off 1.7%, 3M (NYSE: MMM) ending flat, Boeing (NYSE: BA) down 0.6%, Union Pacific (NYSE: UNP) down 1.3%, Honeywell (NYSE: HON) short 1.0%, Cummins (NYSE: CMI) dropped 2.1% and Emerson Electric (NYSE: EMR) down 0.3%.
This article should interest investors in Boeing (NYSE: BA), Raytheon (NYSE: RTN), Digital Globe (NYSE: DGI), GenCorp (NYSE: GY), General Dynamics (NYSE: GD), Goodrich (NYSE: GR), Northrop Grumman (NYSE: NOC), Honeywell (NYSE: HON), Lockheed Martin (NYSE: LMT), Rockwell Collins (NYSE: COL), L-3 Communications (NYSE: LLL), EMBRAER (NYSE: ERJ), FLIR Systems (Nasdaq: FLIR), BE Aerospace (Nasdaq: BEAV), TransDigm (NYSE: TDG), Spirit Aerosystems (NYSE: SPR), CAE (NYSE: CAE), Alliant Techsystems (NYSE: ATK), Hexcel (NYSE: HXL), Triumph Group (NYSE: TGI), Esterline Technologies (NYSE: ESL), Moog (NYSE: MOG-A), Heico (NYSE: HEI), Teledyne (NYSE: TDY), Curtiss-Wright (NYSE: CW), Cavco (Nasdaq: CVCO), Skyline (NYSE: SKY), Nobility Homes (Nasdaq: NOBH), Palm Harbor Homes (Nasdaq: PHHM), Mohawk Industries (NYSE: MHK), Interface (Nasdaq: IFSIA), Albany International (NYSE: AIN), Unifi (NYSE: UFI), Illinois Tool Works (NYSE: ITW), Tyco International (NYSE: TYC), Cummins (NYSE: CMI), Kubota (NYSE: KUB), Ingersoll-Rand (NYSE: IR), Dover (NYSE: DOV), ITT Corp. (NYSE: ITT), Flowserve (NYSE: FLS), Pall (NYSE: PLL), Dresser-Rand (NYSE: DRC), SPX (NYSE: SPW), Gardner Denver (NYSE: GDI), IDEX (NYSE: IEX), Nordson (Nasdaq: NDSN), Graco (NYSE: GGG), Actuant (NYSE: ATU), Middleby (Nasdaq: MIDD), ABB (NYSE: ABB), Eaton (NYSE: ETN), Nidec (NYSE: NJ), Rockwell Automation (NYSE: ROK), Ametek (NYSE: AME), Regal Beloit (NYSE: RBC), Thomas & Betts (NYSE: TMB), Woodward Governor (Nasdaq: WGOV), Caterpillar (NYSE: CAT), Deere (NYSE: DE), CNH (NYSE: CNH), Joy Global (Nasdaq: JOYG), Bucyrus (Nasdaq: BUCY), Agco (Nasdaq: AGCO), Emerson Electric (NYSE: EMR), Parker Hannifin (NYSE: PH), Roper Industries (NYSE: ROP), Pentair (NYSE: PNR), Waste Management (NYSE: WM), Republic Services (NYSE: RSG), Fastenal (Nasdaq: FAST), Vulcan Materials (NYSE: VMC), MDU Resources (NYSE: MDU), Martin Marietta Materials (NYSE: MLM), Owens Corning (NYSE: OC), Valspar (NYSE: VAL), Precision Castparts (NYSE: PCP), United States Steel (NYSE: X), Reliance Steel (NYSE: RS), CRH (NYSE: CRH), CEMEX (NYSE: CX), Eagle Materials (NYSE: EXP), Fluor (NYSE: FLR), McDermott International (NYSE: MDR), Foster Wheeler (Nasdaq: FWLT), Empresas ICA (NYSE: ICA), Stanley Black & Decker (NYSE: SWK), Timken (NYSE: TKR), Kennametal (NYSE: KMT), Leucadia National (NYSE: LUK), Masco (NYSE: MAS), Weyerhaeuser (NYSE: WY), Quanta Services (NYSE: PWR), Chicago Bridge & Iron (NYSE: CBI), EMCOR (NYSE: EME), Snap-on (NYSE: SNA), Toro (NYSE: TTC), GM (NYSE: GM) and Ford (NYSE: F).
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3M COMPANY ABB LTD. ACTUANT CORPORATION ALBANY INTERNATIONAL ALLIANT TECHSYSTEMS, Inc. AMETEK, Inc. Amazon.Com, Inc. Apple, Inc. BE Aerospace, Inc. BOEING COMPANY CAE, Inc. CATERPILLAR, Inc. CEMEX S.A.B. DE C.V. CHICAGO BRIDGE & IRON CO. CNH Global N.V. CRH PUBLIC LIMITED COMPANY CUMMINS, Inc. CURTISS-WRIGHT CORP. Cavco Industries, Inc. DIGITALGLOBE, Inc. DOVER CORPORATION DRESSER-RAND GROUP, Inc. Deere & Company EAGLE MATERIALS, Inc. EMBRAER S.A. EMCOR GROUP, Inc. EMERSON EMPRESAS ICA, S.A. DE C.V. ESTERLINE TECHNOLOGIES FLOWSERVE CORPORATION FLUOR CORPORATION FORD MOTOR COMPANY Fastenal Co Flir Systems, Inc. Foster Wheeler AG GENCORP, Inc. GENERAL DYNAMICS GENERAL MOTORS COMPANY GRACO, Inc. Gardner Denver, Inc. General Electric HEICO CORPORATION HEXCEL CORPORATION HONEYWELL INTERNATIONAL IDEX CORPORATION ILLINOIS TOOL WORKS, Inc. INDUSTRIAL SEL SECT SPDR FD INGERSOLL-RAND PLC ITT CORPORATION KENNAMETAL, Inc. Kubota Corp. ADS L 3 COMMUNICATIONS HLDGS. LEUCADIA NATIONAL CORP. LOCKHEED MARTIN CORP. MARTIN MARIETTA MATERIALS MASCO CORPORATION MCDERMOTT INTERNATIONAL MDU RESOURCES GROUP, Inc. MOHAWK INDUSTRIES, Inc. MOOG, Inc. Middleby Corp NIDEC CORP ADR NORTHROP GRUMMAN CORP. Nordson Corp OWENS CORNING PALL CORPORATION PARKER HANNIFIN CORP PRECISION CASTPARTS CORP. PowerShares QQQ Trust, Series 1 QUANTA SERVICES, Inc. RAYTHEON COMPANY REGAL-BELOIT CORPORATION RELIANCE STEEL & ALUMINUM CO. REPUBLIC SERVICES, Inc. ROCKWELL AUTOMATION, Inc. ROCKWELL COLLINS, Inc. ROPER INDUSTRIES, Inc. S&P DEP RECEIPTS SKYLINE CORPORATION SNAP-ON INCORPORATED SPDR DOW JONES INDUSTRIAL AVERAGE ETF TRUST SPIRIT AEROSYSTEMS HOLDINGS, Inc. SPX CORPORATION Stanley Black & Decker, Inc TELEDYNE TECH, Inc. THE TIMKEN COMPANY TORO COMPANY TRANSDIGM GROUP INCORPORATED TRIUMPH GROUP, Inc. TYCO INTERNATIONAL LTD. SWITZERLAND UNIFI, INC. NEW UNION PACIFIC CORP. UNITED PARCEL SERVICE, INC. CLASS B UNITED STATES STEEL CORPORATION UNITED TECHNOLOGIES CORPORATION VALSPAR CORPORATION VULCAN MATERIALS COMPANY WASTE MANAGEMENT, Inc. WEYERHAUSER COMPANY
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