On Aug 1, 2022, the ISM Manufacturing PMI declined to 52.8 in July of 2022 from 53 in June, beating market forecasts of 52. The reading marked 26th straight month of rising factory activity but the weakest rate since June of 2020, as new order rates continue to shrink although supplier deliveries improved and prices softened to levels not seen in two years, per tradingeconomics.
New orders (48 vs 49.2) and employment (49.9 vs 47.3) declined and production (53.5 vs 54.9) and supplier deliveries decelerated (55.2 vs 57.3) while inventories rose faster (57.3 vs 56) and price pressures relaxed (60 vs 78.5), the tradingeconomics article noted.
As many as 11 manufacturing industries reported growth in July. The winning industries are Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Printing & Related Support Activities; Computer & Electronic Products; Transportation Equipment; Machinery; Textile Mills; Primary Metals; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. The seven industries reporting contraction in July compared to June, in the following order are: Wood Products; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Chemical Products.
Against this backdrop, below we highlight a few sectors that emerged winners last month in light of the manufacturing numbers.
Metals & Mining – SPDR S&P Metals & Mining ETF ( XME Quick Quote XME - Free Report)
The industry survey revealed that “continuing delivery and staffing issues have eaten away the bottom line.” Fabricated Metal Products industry revealed that “markets are still holding up.” The underlying S&P Metals & Mining Select Industry Index represents the metals and mining sub-industry portion of the S&P Total Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, American Stock Exchange, NASDAQ National Market and the NASDAQ Small Cap exchanges. The Metals & Mining Index is a modified equal weight index. The fund charges 35 bps in fees.
Chemicals – iShares U.S. Basic Materials ETF ( IYM Quick Quote IYM - Free Report)
The industry survey revealed that “current order books are full, but there have been signs of a slowdown beginning in the fourth quarter.” But so far, the industry is in decent shape. The underlying Russell 1000 Basic Materials RIC 22.5/45 Capped Gross Index measures the performance of the basic materials sector of the U.S. equity market. The fund charges 41 bps in fees.
Computer & Electronic Products – Technology Select Sector SPDR ETF ( XLK Quick Quote XLK - Free Report)
The industry survey indicated that “material extended lead times still affecting business, and the challenging labor market is a huge factor too. Backlog is healthy; we just cannot deliver to customers due to material issues.”
The underlying Technology Select Sector Index includes companies from the following industries: computers & peripherals; software; diversified telecommunication services; communications equipment; semiconductor & semiconductor equipment; internet software & services; IT services; wireless telecommunication services; electronic equipment & instruments; and office electronics. The fund has a Zacks Rank #1 (Strong Buy).