Factory funk: Manufacturing PMIs, construction spending


  • Main U.S. indexes mixed: DJI green, S&P slips, Nasdaq falls ~1%
  • Cons disc down most among S&P sectors; energy leads gainers
  • Euro STOXX 600 index off ~0.1%
  • Dollar, bitcoin dip; gold up, crude rallies >5%
  • U.S. 10-Year Treasury yield falls to ~3.42%


Monday data showed U.S. goods-makers are feeling the softening demand wrought by restrictive Fed policy, even as construction of manufacturing facilities surges.

U.S. factory activity showed a steeper-than-expected pull-back in March, contracting for the fourth month in a row to the lowest level since the immediate aftermath of the COVID shutdown.

The Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) (USPMI=ECI) landed 1.4 points lower than the February reading and 1.2 points to the south of consensus.

A PMI number south of 50 signifies monthly contraction

The crucial “new orders” component slid to 44, just one point above the level commonly associated with recession and the employment picture soured, dropping 2.2 points to 46.9.

One ray of sunshine was provided by the prices paid index, which dipped into contraction – a good omen for inflation watchers.

“With Business Survey Committee panelists reporting softening new order rates over the previous 10 months, the March composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period,” writes Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee.

Commentary from the survey’s participants were a bag of glass-half-full/empty sentiment.

Phrases such as “sales a bit down, and budgets being cut,” and “sales are slowing at an increasing rate” are tempered with words like “input costs (are) falling” and “the overall supply environment is far better.”

Here’s a breakdown of the index and some of its components:

Not to be left out, S&P Global also released its final take on last month’s manufacturing PMI (USMPMF=ECI), which came in at 49.2, just a shade lower than its 49.3 “flash” reading released a few weeks ago, but a modest improvement over February.

The uptick as driven by improvement in production, employment and delivery times, but held in contraction territory by softening demand.

“Although output rose for the first time since last October, growth was fractional, and largely supported by ramping up production following an unprecedented reduction in supply chain pressures,” says Siân Jones, senior economist at S&P Global Market Intelligence.

“Sparse demand amid pressure on customer spending due to higher interest rates and inflation spoke to challenges ahead for goods producers if there is little change in domestic and international client appetite,” Jones adds.

The dueling indexes differ in the weight they allocate to their various components (e.g., new orders, employment).

The graphic below shows the extent to which the two disagree:

Finally, there’s good news and bad news regarding construction spending.

Expenditures on U.S. construction projects (USTCNS=ECI) unexpectedly dropped by a nominal 0.1% in February, according to the Commerce Department.

But that’s on the heels of a rather large upward revision to the January print – to a 0.4% gain from a 0.1% decline.

Digging beyond the headline, a 0.6% drop in outlays for residential projects more than offset a robust 2.7% increase in manufacturing facilities.

Spending on private projects was flat, while government expenditures on building projects dropped 0.2%.

While softness on the residential side is likely an echo of the housing market’s pandemic related boom and bust, “so far in Q1, construction spending is +3.5% q/q higher than the Q4 average,”

“The data show still-weak residential spending – although less so compared to Q4, but still-positive public and nonresidential construction spending so far in the first quarter,” says Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Wall Street is mixed in late-morning trading, with a more than 5% surge in crude prices CL1! giving energy names SPN a comfortable lead among sector gainers.

Mega-cap momentum stocks NNYFANG are clear laggards, pulling the Nasdaq into the red.

(Stephen Culp)



After a smooth Q1 for growth and technology stocks which drove record quarterly gains for the NYSE FANG+TM index NNYFANG, investors are now concerned that renewed inflation fears, upcoming economic data and the earnings season could test their strength.

The index, which includes Alphabet Inc GOOG, Tesla Inc TSLA and Apple Inc AAPL, slipped 0.9% after a near 40% surge in the first quarter, as rising Treasury yields prompted a rotation out of growth stocks into energy and financials.

Growth stocks have rallied since the start of the year on hopes of smaller interest rate hikes by the Federal Reserve, lifted further after the banking turmoil in March. The S&P 500 growth index (.IGX) is up 9.8% so far this year versus 7% gain in the S&P 500 SPX.

“This week’s economic data could be a catalyst for Q1 market darlings, such as high PE semiconductor stocks, to take a haircut,” Saxo’s market strategist Jessica Amir said.

Key economic data this week include the JOLTS job openings on Tuesday and monthly payrolls report on Friday. Monday’s figures showed U.S. manufacturing activity slumped to the lowest level in nearly three years in March as new orders continued to contract.

Most megacap growth and tech stocks edged lower on Monday, with TSLA down 5.3% as worries on excess production overshadow record deliveries.

“The real test is possibly still to come with the next set of earnings updates, which will provide some clarity on whether investors are still putting too high a value on big U.S. brands at a time when the consumer is still under pressure,” said Danni Hewson, head of financial analysis at AJ Bell.

ConstituentsQ1 gains (%)
Apple Inc AAPL26.9%
Amazon.com Inc AMZN23.0%
Microsoft Corp MSFT20.2%
Tesla Inc TSLA68.4%
Alphabet Inc GOOG17.6%
Advanced Micro Devices AMD51.3%
Meta Platforms META76.1%
Netflix Inc NFLX17.2%
Nvidia Corp NVDA90.1%
Snowflake Inc SNOW7.5%

(Bansari Mayur Kamdar)



U.S. stock indexes are mixed early on Monday as rising oil prices stoked concerns about more interest rate hikes from the Federal Reserve to temper inflation, while a jump in shares of energy firms helped stem losses.

Saudi Arabia and other OPEC+ oil producers announced further output cuts of around 1.16 million barrels per day, threatening an immediate rise in prices.

In any event, the DJI DJI is jumping, while the S&P 500 SPX is modestly higher. The Nasdaq IXIC is lower.

Energy SPN is leading S&P 500 sector gainers higher with a jump of more than 5%.

NYMEX crude futures CL1! are posting a more than 6% rise and are back over $80. Of note, after finally flirting with its 200-week moving average in mid-to-late March, CLc1 has gained more than 25%.

Here is an early trade snapshot:

Thomson Reuters

(Terence Gabriel)



The S&P 500 SPX ended last week on a high note, rising for three-straight days, while closing at 4,109.31, which put it just slightly above the resistance line from its January 2022 record high:

Thomson Reuters

That said, with e-mini S&P 500 futures ES1! dipping slightly in premarket trade, the SPX appears poised to pullback around 5 points at Monday’s open.

Still, the broken resistance line should now attempt to act as support at around 4,098 on Monday.

A resumption of strength should keep the S&P 500 focused on a key barrier that runs from 4,195.44 to 4,203.04. This zone also includes the 23.6% Fibonacci retracement of the March 2020-Janaury 2022 advance at 4,198.70.

Since breaking back below this Fibonacci retracement on August 22 of last year, the SPX has managed by decimals, just one daily close back above this line. That was on August 25, one day prior to Fed-Chair Powell’s especially hawkish August 26 Jackson Hole speech, which ultimately sent the SPX sliding to new lows.

Strength into this year’s early February high once again stalled as the benchmark index flirted with this resistance zone.

Thus, traders remain keenly focused on this barrier to see if the SPX can ultimately breakout of its multi-month range to the upside.

Quickly closing back below the broken trendline from the January 2022 high can put the SPX on the back foot again within the confines of its range.

The next support is at the early and late-March highs at 4,078.49 and 4,049.49. The rising 50-day moving average should be just over 4,020 on Monday.

(Terence Gabriel)

source: https://www.tradingview.com/news/reuters.com,2023:newsml_L1N3661BQ:0-factory-funk-manufacturing-pmis-construction-spending/


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