US stock prices rose again on Tuesday, pushing the S&P 500 index to a new all-time high, while the Dow Jones Industrial Average is closing on its own record. By late morning in New York, the Dow Jones was up 0.40% or 65 points, at 16,523, around 66 points from its record intraday high, and the S&P 500 index had advanced 0.43% to 1880.2 after earlier hitting a high of 1884.60, a new record.
By Peter Martin
Tuesday, April 1, 2014
The gains came after reports showing solid, if unspectacular, expansion in the manufacturing sector last month. Markit’s final reading for March of its manufacturing PMI came in at 55.5, which is unchanged from the mid-month ‘flash’ reading, but is a slower pace of expansion than the 57.1 level of the index seen in February. With 50 marking the point between expansion and contraction, 55.5 remains a fairly decent level of growth for the sector, though, and with the new orders component of the index leading the way with a reading of 58.1 there are reasons to be optimistic that there will be momentum carried into April.
The ISM manufacturing index, the other widely-followed gauge of the manufacturing sector at a nationwide level, backed up this assessment of solid growth, coming in with a reading of 53.7 for March, a small rise from the 53.2 seen in the month prior. Though slightly below expectations and increasing only a little from February’s quite weak starting point, this remains a respectable result, with new orders up at 55.1 and backlog orders growing strongly to 57.5. Production levels snapped back sharply after being depressed by winter weather in February, but the employment component disappointed, slipping to 51.1 and only just keeping its nose in growth territory; all in all, the report is more positive than anything else.
The weakness in the employment component of the ISM manufacturing index comes at an interesting time, just a day after Fed Chair Janet Yellen said that the central bank would need to remain accommodative ‘for some time’ because of slack in the labor market, and just a few days before the official government employment report for last month.
The employment situation report is always considered a hugely important data release, but the last couple of results were possibly clouded by weather issues. Not only will the March report likely be free of such distortions, allowing the market its first ‘clean’ set of employment data this year, but there is also the possibility of significant revisions to previously-reported numbers, given the Bureau of Labor Statistics included a caveat in February’s report stating ‘severe winter weather occurred in much of the country during the February reference period’. A Reuters survey of analysts predicts that non-farm payrolls increased by 200,000 last month (compared with the 175,000 payroll growth seen in February) and that the unemployment rate will improve to 6.6% from 6.7%. Ahead of the official data, we also have ADP’s estimate for private payrolls, which is scheduled to be released on Wednesday morning.
In the forex market, the euro has strengthened against the dollar again, gaining 0.27% after unemployment data for the eurozone and for Germany, the biggest economy in the eurozone, showed improvement. Eurozone unemployment was 11.9% in February, while January’s level was downwardly revised to 11.9% also (having previously been reported as 12%). German unemployment declined a seasonally-adjusted 12,000 to 2.901 million in March, for an unemployment rate of 6.7%, better than the 6.8% that had been forecast by a Reuters survey. Though these are not large improvements, the historically conservative ECB is unlikely to feel forced into further stimulus action in light of such evidence.
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