By Carlos Guillen
Equity markets are down but not too much. In fact, the Dow Jones Industrial Average reached a new intraday high of 14,605.72; however, it pulled back rather sharply after rather less than expected economic data on the manufacturing sector. Nonetheless, despite the lack luster economic result, stocks are attempting to move into winning territory, with the Dow less than ten points in the red, although it's outperforming the S&P (-0.3%) and the Nasdaq (-0.7%).
The main bit of domestic economic data out today was the Institute for Supply Management (ISM) Purchasing Managers' index (PMI), considered by many to be a very important health indicator of the manufacturing industry here at home. PMI in March clocked in at 51.3 percent, decreasing from the 54.2 percent reported for February and landing below the 54.0 percent consensus estimate. It is apparent that limited improvements in the global economy and concern about the effects on the U.S. expansion from automatic cuts in federal spending may be prompting some companies to cut back. On the other hand, progress in the housing industry and resilient consumer demand is serving to attenuate the factory slowdown, keeping them still in growth mode. Given that a reading above 50 percent indicates the manufacturing economy is generally expanding, this PMI result puts us into the fourth month of growth mode. Moreover, given that a PMI over 42.2 percent, over a period of time, generally indicates overall economic expansion, the result also indicates the 46th consecutive month of overall economy growth. It should be noted, however, that new orders in the ISM report, considered to be an important leading indicator, showed a rather sharp drop. In fact, new Orders totaled 51.4 percent, down from the 57.8 percent posted for the prior month. So while the U.S. is still in economic expansion, the sharp drop of new orders may be indicative of very weak GDP growth in the first quarter.
Over in China, the nation's official manufacturing purchasing managers' index released by the National Bureau of Statistics rose to an 11-month high of 50.9 in March, but landed below economists' estimate of 52.0. A separate survey by HSBC showed its final PMI climbing to 51.6 last month, basically in line with a flash reading of 51.7 and up from February's 50.4. While new orders at Chinese factories rose sharply, an uncertain outlook for exports could still slow the speed of economic recovery there. And if Chinese monetary policy makers decide to tighten liquidity, the slowdown in growth could be even sharper.
In all, stocks are down but are heading back toward the green. If the trend persists, the Dow may end the trading session in winning territory.
All Ears on Corn Forecast
By David Urani
At the end of the week last week, the USDA gave out its new crop forecast and that's been great news for the past two sessions for anyone that buys food. That's because corn and other crop prices have taken a plunge. Corn prices are down more than 11% over the past two sessions, to below $7.00 per bushel.
The main surprise in the USDA report was the reading on corn stocks, which were down 625 million bushels from last year at 5.4 billion, but that was actually 400 million bushels better than expected by traders. In the meantime, planned corn acreage will be up slightly in 2013; at 97.3 million acres, this would be the most since 1936.
Of course, this is a big relief that follows last year's historic drought. As a reminder, corn had hit a record high in August, above $8.00 per bushel. This may be a boost to consumer confidence once it filters down to the grocery store. Meanwhile, the US may be able to regain some of its lost export business which has been stolen by lower-priced supply out of South America.