Manufacturing Bounces Back; Pending Home Sales Decline

Includes: SPY, XHB
by: Judith Levy

The Institute for Supply Management's index of manufacturing activity rose to a higher-than-expected 54.7 in April from 50.9 in March, its fastest pace in nearly a year, as order figures and production improved. Any reading over 50 is considered an expansion indicator. Economists had been expecting a reading of 51. Factories may now be in a position to boost production after containing inventories over the past two quarters. If the factory sector is indeed emerging from a period of weakness, analysts believe it should help the overall economy withstand pressure from the slumping housing sector. Exports are being strongly boosted by European and Asian demand combined with a weak dollar. New orders swelled to 58.5 in April from 51.6 in March, the fifth monthly gain in a row; inventories fell to 46.3 in April from 47.5 in March, the ninth consecutive drop. Meanwhile, the National Association of Realtors said pending home sales in March fell 4.9% from February to 104.3, their lowest point in four years. Home sales in April may thus be weak, leaving excess inventory on the market and forcing production constraints.

Sources: ISM press release, NAR press release Wall Street Journal, Bloomberg, Reuters, Forbes
Commentary: Removing Housing from GDPHousing Bubble and Real Estate Market Tracker
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG), streetTRACKS SPDR Homebuilders ETF (NYSEARCA:XHB), iShares Dow Jones US Home Construction (NYSEARCA:ITB)

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