Stocks began the second quarter much as they ended the first, closing higher, with the S&P 500 reaching another new record. The index closed up 0.7% at 1885.52, with eight of its 10 sectors rising, led by consumer discretionary stocks, which got a boost from strong March auto sales. NASDAQ was again the best performer as it was on Monday, gaining more than twice as much as the S&P. Small cap stocks also did well, the Russell 2000 rising 1.3%. The Dow Jones Industrial Average was the laggard, rising a comparatively modest 0.5%. Treasury bond prices were lower, the yield on the 10-year note rising four basis points to 2.76%.
In addition to being the first day of the quarter, Tuesday was a big day for reports on the condition of global manufacturing, where the results were slightly weaker than expected.
- In the U.S., the Institute for Supply Management’s manufacturing index rose modestly to 53.7 in March from 53.2 the prior month, slightly weaker than the consensus forecast that called for a reading of 54.0. Within the index, results were a mixed bag. The output subindex rebounded 7.7 points to 55.9 from 48.2 in February, which had been the lowest reading since May 2009; the gain was the largest monthly increase in production since June 2009. The new orders index rose to 55.1 from 54.5 in February. On the downside, the employment index dropped 1.2 points to 51.1 from 52.3.
- In China, HSBC’s purchasing managers’ index for the manufacturing sector fell for the third straight month to 48.0 from 48.5 in February, the lowest reading since last July and remaining in contraction territory. An HSBC spokesman said the decline “implies that Q1 GDP growth is likely to have fallen below the annual growth target of 7.5%,” adding that it expects the government to “fine-tune policy sooner rather than later to stabilize growth.” The official government PMI rose slightly to 50.3 from 50.2 the previous month.
- Markit’s manufacturing PMI for the eurozone fell to a three-month low of 53.0 in March from 53.2 but remained in 50+ growth territory for the ninth straight month. Markit said the average reading over the first quarter was 53.4, the best results since Q2 2011. The PMI for Germany, the zone’s biggest country, fell to a four-month low of 53.7 from 54.8, indicating a slight slowing in its growth rate.
U.S. auto sales for March were also released on Tuesday, and most of the news there was positive, as purchases rebounded strongly, indicating pent-up demand following severe winter weather. Fiat Chrysler led the way with a 13% jump in sales compared to the year earlier period, followed by an 8.3% gain at Nissan. Toyota’s sales grew 4.9% while GM’s rose 4% and Ford’s 3.3%. Volkswagen bucked the uptrend, with sales down 2.6%. In a separate, unrelated report, U.S. construction spending rose 0.1% in February, in line with estimates. The prior month was revised downward to show a 0.2% decline versus a 0.1% rise.
Stocks were mostly higher around the world except in Japan, where a sharply higher sales tax levy took effect. The Nikkei 225 fell 0.2% as the government increased the sales tax to 8% from 5%. Elsewhere in Asia, Hong Kong’s Hang Seng index jumped 1.3% while the Shanghai composite rose about half that. India’s Sensex gained 0.3%. European shares were sharply higher, led by 1% gains in Spanish and Italian stocks and a 0.8% rise in French stocks. Germany’s DAX index rose 0.5% while the broad-based Stoxx Europe 600 gained 0.6%. WTI oil prices dropped more than 2%, the most in three weeks, falling below $100 a barrel on speculation that tomorrow’s crude inventories report will show an 11th straight weekly increase.
Reports/dates/facts/links worth paying attention to over the next week:
- April 2: ADP national employment report for March; factory orders for February.
- April 3: ISM non-manufacturing composite index for March; weekly unemployment claims;
- April 4: Labor Department payrolls and employment report for March.
Copyright © 2014 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.