Manufacturing Report Hits Stocks To Start Shortened Week
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The ISM Report showed manufacturing isn’t as fun as Charlie Chaplin is making it out to be
Dow: 13,036 (-0.42%) S&P 500: 1,405 (-0.12%)
Welcome back. Time to dry out those salty Bonobos, amigos. If investors were out enjoying the sun this past 3-day weekend, then stocks welcomed them back from summer by smacking their aloe-doused, lobster red sunburns right in the middle of their backs. The Dow lost over 100 points in the morning following an unpleasant manufacturing report, but clawed back to finish down 55 points. US auto sales came in very strong for August, while Netflix, Facebook, Amazon and even Campbell Soup splashed headlines on the Tuesday start to the Labor Day-shortened week. Investors will next be looking ahead to Thursday’s European Central Bank policy meeting and the Labor Department’s monthly employment report on Friday.
ISM Manufacturing Index is slowest since June of ’09, leads market pessimism
American investors will get a tingly feeling when they hear that Silicon Valley is still the epicenter of the tech universe or that the Financial District of NY remains the shoe-shining mecca of the Western Hemisphere…but those are tech and service industries. To figure out what is really produced – physically – in America we need to read manufacturing data. The ISM manufacturing index is a poll of factory managers in America to see how fast the machines are humming and the speed of their assembly lines – and today’s report revealed a level of 49.6 for August, which means business is contracting (for anything <50). It was actually the lowest level since June of 2009, the month when the recession officially ended (according to the economic definition of two straight quarters of GDP contraction). That didn’t sit well with investors and patriots alike who want America to be building things (manufacturing is labor intensive too, so busy factories help keep unemployment down). On top of that a separate report showed construction of buildings and houses slowed, making for a hammer-and-nail double whammy on investors seeking tangible, physical production in the U.S. It seems the U.S. is finally falling victim to a manufacturing epidemic that has already slowed Asia and created contraction in Europe. Caterpillar (CAT) and United Technologies (UTX) (which manufactures elevators and other heavy-duty goods) naturally fell more than any other Dow component on news of slowing manufacturing.
U.S. auto sales show strength in August
Detroit may have become an Armageddon looking no-man’s-land run by zombie gangs from what we’ve read on TripAdvisor, but U.S. car companies are thriving. Lifted by an American automobile fleet whose average age is higher than ever in history (the average car is 11 years old) car dealerships are swamped by Americans finally hitting the showrooms en masse. Chrysler, now controlled by Italy’s FIAT (aka “Fix It Again, Tony”), led US auto manufacturers thanks to the new Dodge Dart and successful introduction of the pasta-powered Fiat 500 in America. The 37% increase in Escapes (a small SUV) driven off lots helped Ford (F) stock add over 1%, a 13% sales improvement for the month from a year ago. General Motors (GM) shares dipped slightly, but the powerhouse beat forecasts with a 10% increase in August sales. GM continues to be held back by its major stake in European business, where many of its French plants are siting idle. But stateside, car sales are on pace to top expectations of 14 million – 2012 could be the industry’s best year for total sales in 5 years.
Amazon move hurts Netflix, Facebook hits new low and Campbell Soup finally wins
Amazon.com (AMZN) signed a major licensing deal with superhero-themed cable channel Epix to bring bad-guy-fighting movies to their video streaming service – the news pushed Epix owner Lions Gate Entertainment (LGF) up 3% and slammed competing online-movie provider Netflix (NFLX) for a 6.35% loss. Remember last week when Facebook (FB) fell to a new low after Bank of America-Merril Lynch cut its target price? Equity research departments at investment banks assess what they believe a stock should be worth (a “target price”) based on future earnings potential and report it to their VIP investors. Well FB shares dipped 1.8% to a new, new low (we’ve type those words a lot this summer) of $17.73 after Morgan Stanley and JP Morgan, who both prepared the IPO, also dropped their forecasts of the stock’s target price. And for those keeping score, a streak is over – after 8 quarters with falling soup sales, Campbell Soup (CPB) rose .11% as earnings and revenues beat analysts’ expectations.
Tomorrow:
- With not much econ data, it’s probably a good idea to turn to the NFL season kick-off – Giants v. Cowboys NFC east showdown
- The Democratic National Convention features blast from the past Bill Clinton live from Charlotte
