In spite of discouraging manufacturing numbers from major
global economies, benchmarks accrued gains on Monday.
Manufacturing activity of U.S., China and Europe contracted for
the month of May. Meanwhile, car sales in Europe also fell for
the month. Of the top ten S&P 500 industry groups, consumer
staples stocks gained the most.
The Dow Jones Industrial Average (DJI) gained 0.9% to close
the day at 15,254.03. The S&P 500 increased 0.6% to finish
Friday's trading session at 1,640.42. The tech-laden Nasdaq
Composite Index rose 0.3% to end at 3,465.37. The fear-gauge CBOE
Volatility Index (VIX) lost 0.1% to settle at 16.28. Consolidated
volumes on the New York Stock Exchange were roughly 3.69 billion
shares. Declining stocks outnumbered the advancers. For the 50%
that declined, 47% advanced.
Monday witnessed a fairly volatile session as manufacturing
activity for the U.S. and China fell for the month of May.
Following these developments, benchmarks lost as much as 1% but
revived towards the end of the day. Investors were encouraging by
these developments, helping benchmarks to finish in the green.
Questions on the stability of the global economy have risen again
which in turn might influence the Federal Reserve to continue
with the bond-purchasing program at its current pace.
Manufacturing activity in Europe declined for the 22nd
consecutive month. However, the decline was lower than the
figures reported in past four months.
According to the Institute of Supply Management, the PMI came
in at 49% compared to 50.7% in April. This figure also came in
below the consensus estimates of 50.0%. This is the first time
since November 2012 that manufacturing has contracted. The New
Orders Index decreased in May to 48.8% from 52.3% in the previous
month while the Production Index decreased to 48.6% from previous
month's figure of 53.5%. The Employment Index decreased
marginally to 50.1% from previous month's 50.2% while the Prices
Index decreased to 49.5% from 50.0% in April.
Meanwhile, according to the U.S. Department of Commerce,
construction spending decreased for the month of March.
Construction spending for the month of March was recorded at
$856.7 billion or 1.7% below February's figure of $871.2 billion.
Private construction decreased 0.6% to $ 598.4 billion compared
to February while public construction decreased 4.1% to $258.3
billion from February's figure of $269.2 billion.
On the international front, manufacturing activity registered
by China added to the investor woes. The HSBC China Manufacturing
PMI index contracted for the first time in seven months. The
index came in at 49.2 in May compared to April's figure of 50.4.
However, official figure which was released recently came in at
50.8. This data comes in a week after the International Monetary
Fund lowered the Gross Domestic Product to 7.75% from 8.0%. Total
new orders along with export orders decreased while output growth
increased marginally. However, the purchasing activity contracted
for the first time in past eight months. If China's economy
continue to grow at the current pace, it seems improbable for the
country to achieve 7.5% growth rate in 2013.
The automobile industry had reason for cheer when car sales
picked up in the month of April. However, in May car sales have
dropped. Major economies such as France, Italy and Spain have
registered a drop in car registrations, though it is higher than
the decline in the previous month. Car sales in France contracted
10.3% compared to a fall of 5.2% in April, while car sales in
Italy contracted by 7.9% compared to a fall of 10.8% in April.
Car sales in Spain dropped 2.6% in May compared to a marginal
increase in April, attained for the first time since August.
Of the top ten S&P 500 industry groups, consumer staples
stocks gained the most. The Consumer Staples Select Sect. (XLP)
gained 1.1%. Stocks such as the Procter & Gamble Company
), the Coca-Cola Company (NYSE:
), Wal-Mart Stores, Inc. (NYSE:
), CVS Caremark Corporation (NYSE:
) and PepsiCo, Inc. (NYSE:
) gained 1.2%, 2.1%, 1.1%, 1.9% and 0.8%, respectively.
CVS CAREMARK CP (CVS): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
PEPSICO INC (PEP): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis
WAL-MART STORES (WMT): Free Stock Analysis
To read this article on Zacks.com click here.