Dow Edges Over 15,000 as Factory Orders Eke Past Expectations

Andrew Klips  |

The Dow Jones Industrial Average is trying to the third time is four sessions to make a move and hold over the psychological barrier of 15,000, getting a lift on Tuesday from factory orders rising for the second straight month in May. It's the third rise in the past four months, lending to a stabilizing manufacturing industry after some deceleration led by slowing demand in China, the European recession and concerns about tax hikes and budget cuts in the U.S.

The Commerce Department reported that new orders for manufactured good increased $9.9 billion, or 2.1 percent, in May to $485.0 billion, following a revised 1.3 percent expansion (up from 1.0 percent) in April. Excluding the volatile transportation component, new orders were up 0.6 percent.

Economists were expecting total new orders to rise 2.0 percent.

Shipments reversed course after two declining months, rising 1.0 percent to $483.6 billion. Unfilled orders increased 0.8 percent to $1.005 trillion, marking the third expansion in four months. Inventories rose for the sixth straight month to $627.8 billion. That's the highest level since the series was first published in 1992 on a NAICS basis.

Transportation orders were up by 10.9 percent during May, fueled in part by a 50.8 percent jump in nondefense aircraft and parts.

Orders for durable goods were up by 3.7 percent, rather than the 3.6 percent announced by the Commerce Department last week.

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Nearly all industries posted gains for May compared to April with more orders coming for primary metals (+0.8 percent), machinery (+0.7 percent) and computers and electronics (+2.4 percent), to name a few gainers. Fewer orders for fabricated metal products (-1.1 percent) were the only headline decliner.

The upbeat read on manufacturing follows a report from the Institute for Supply Management on Monday that showed manufacturing expanded in June after dipping into contraction territory in May. The ISM's headline manufacturing index topped economist forecasts of a 50.5 reading by improving to 50.9 in June from 49.0 the month prior. Numbers over 50 indicate expansion in factory activity, while readings below signal contraction.

Markit Economics also reported on Monday that manufacturing in June expanded, albeit at a slower pace than May. Markit's "flash" PMI recorded a 51.9 mark, down from 52.2 a month earlier.

Adding to the rosy economic data this week, the Commerce Department said on Monday that construction spending rose 0.5 percent in May compared to April, hitting its highest level in more than 4 years. Spending on private residences rose 1.2 percent to the highest level since October 2008, to help offset a 1.4 percent drop in nonresidential projects.

The Dow is printing 15,037 on gains of 62 points heading into the noon hour on Tuesday. The Dow is not only battling the psychological barrier of 15,000, but also the 50-day moving average, which currently is at 15,060. The S&P 500 is up 7 points while the Nasdaq has gained 14 points in Tuesday action, as all three benchmark indexes are looking to kick-off July with two consecutive green days.

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