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 (NYSE:PG), the Coca-Cola Company (NYSE:KO), Wal-Mart Stores, Inc. (NYSE:WMT), CVS Caremark Corporation (NYSE:CVS) and PepsiCo, Inc. (NYSE:PEP) gained 1.2%, 2.1%, 1.1%, 1.9% and 0.8%, respectively.