United States manufacturing data drove the Dow Jones Industrial Average (DJIA) to its highest close in over four years Tuesday, as the blue chip index finished the stock market trading session at 13,279 points following the 4:00pm Eastern Time closing bell.
ISM Manufacturing Report
The ISM Manufacturing Report released May 1st by the Institute for Supply Management showed that economic activity related to manufacturing within the United States grew during the month of April; marking the 33rd straight month of growth. Likewise the overall economy experienced growth for the 35th consecutive monthly period according to the report, which can be viewed in its entirety here.
Bradley J. Holcomb, Chairman for the ISM Manufacturing Business Survey Committee was quoted in the statement saying that the “PMI registered 54.8 percent, an increase of 1.4 percentage points from March’s reading of 53.4 percent, indicating expansion in the manufacturing sector for the 33rd consecutive month. Sixteen of the 18 industries reflected overall growth in April, and the New Orders, Production and Employment Indexes all increased, indicating growth at faster rates than in March. The Prices Index for raw materials remained at 61 percent in April, the same rate as reported in March. Comments from the panel generally indicate stable to strong demand, with some concerns cited over increasing oil prices and European stability.”
Performance By Industry
The report went on to state that out of the 18 manufacturing industries included in the index, “16 are reporting growth in April: Furniture & Related Products; Printing & Related Support Activities; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Primary Metals; Paper Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Computer & Electronic Products; and Petroleum & Coal Products. The only industry reporting contraction in April is Wood Products.”
Dow Jones Year To Date Gain
For the year, the Dow Jones, which is comprised of 30 component blue chip stocks, has gained 8.69%, or 1,061 points from its December 30, 2011 closing level of 12,217. Tuesday’s Dow boost was led by aluminum maker Alcoa Inc. (NYSE:AA) and Bank of America Corp. (NYSE:BAC).
The 8.69 percent return on investment for those who placed assets in funds that track the Dow is greater than many analysts expected following 2011. However, sovereign debt concerns that were at one time limited to Greece have spread throughout the Eurozone to Spain, Italy, Portugal and others. Those countries are currently struggling with rising borrowing costs, high unemployment rates and citizen outrage over austerity measures.
Yields for ten year debt sold by Portugal are have been hovering close to 12 percent in recent months while Spanish bond yields for ten year notes are around 6 percent while interest rates for U.S. sovereign debt in the form of Treasuries are below 2 percent for 10-year commitments. The perceived safe haven of United States sovereign debt and equities is a stark contrast to events that occurred during the 2008 financial crisis, when the federal government bailed out a number of banks and other firms claiming that some companies were “too big to fail.”
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