Factory Orders Help, But Us Markets Fluctuating
Stock prices on the whole have been trading down in negative territory on Tuesday, following fresh all-time highs being set by the Dow Jones Industrial Average and the S&P 500 Index on Monday.
Wednesday, June 4, 2014 - 00:00
The most significant US economic release of the day was the factory orders report for April, which came in better than expected and helped to lift the stock market off its lows, though it wasn’t enough to lift stocks out of the red entirely.
Factory orders, a measure of the dollar value of new orders received for both durable and non-durable goods, came in up 0.7% on the month for April, beating the consensus estimate which had pointed to a 0.5% gain, and providing the latest piece of evidence to signal strength in the US manufacturing sector. There was also the added boost of a significant upward amendment to the March report, revised higher to 1.5% after originally being reported as an already-strong 1.1%. A 0.9% jump in unfilled orders, alongside an upwardly-revised 0.8% for this component for March, points to plenty of impetus for shipments in the months ahead. Put into context with the gains seen yesterday in the two manufacturing gauges from Markit and the ISM, it would appear that the manufacturing sector is a bright spot in the economy at the moment.
The upbeat nature of the factory orders report gave stock prices a little lift, but approaching midday in New York the DJIA was still down 0.27% or 45 points at 16,698 and the S&P 500 was off by 0.26% at 1920.0. Bucking the day’s downward trend were automakers General Motors and Ford, both of which advanced after auto sales for May came in higher than expected. Clement weather and the large number of weekends in May this year will have played a part in the bumper sales figures, with Chrysler, Nissan, Toyota and General Motors all reporting sales gains over last May in double-digit percentages.
We’re in the middle of a busy few days for eurozone economic data, leading up to Thursday’s rate decision from the European Central Bank (ECB), making it an interesting time for those trading the euro. Today’s data showed eurozone inflation easing further in May, with the flash harmonized index of consumer prices (HCIP) coming in at a year-on-year change of 0.5%, below expectations and down from the 0.7% seen in April. The core rate, which excludes the more volatile components of energy food, tobacco and alcohol, was 0.7%, down from 1.0% in April. This very much strengthens the case for those on the ECB’s governing council pushing for extra stimulus measures at Thursday’s meeting. Interestingly though, the euro strengthened against the dollar today, gaining 0.19% to 1.3622 and this may be indicative of profit taking from those already holding short positions on the euro.
The ECB, historically more conservative in its approach to making changes than the Fed or the Bank of England, is expected to cut its benchmark rate on Thursday, according to a survey of analysts conducted by Reuters. With the deposit rate currently at a record low 0.25%, the ECB is running out of room to manoeuver and there is a possibility of the central bank testing the uncharted waters of negative rates.
There was some good news for the eurozone today, though, with unemployment coming in at 11.7% for April, a touch better than was expected and a small but welcome drop from the 11.8% recorded for March. Clearly this is good news, but with the unemployment ranging widely across the joint economic region, from 4.9% in Austria and 5.2% in Germany to 25.1% in Spain, there are inherent challenges for the ECB in trying to apply one policy across such varying nations. First quarter GDP data for the Eurozone will be released on Wednesday.
This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.