Wall Street lost some momentum in early trading on Monday morning after the Institute for Supply Management delivered its monthly report on the U.S. manufacturing sector that came in worse than economist expected.
During March, the closely watched ISM purchasing managers’ index fell to 51.3 percent from the 54.2 percent mark in February. Readings over 50 percent indicate that more manufacturers are expanding economic activities than contracting. It was the fourth consecutive month of expansion, however, the month-over-month deceleration surprised economists who were predicting another 54.2 percent reading.
The February reading was the lowest so far this year. In the past 12 months, the ISM manufacturing index has only showed contraction once, in November with a 49.9 percent reading. The average across the year is 51.7 percent.
The index of new orders also grew, albeit at a slower rate as well, registering 51.4 percent after a 57.8 percent reading in February. Similarly, the Production Index dropped to 52.2 percent from 57.6 percent the month earlier.
The Employment Index was a bright spot in the report, increasing from 52.6 percent in February to 54.2 percent in March, which may bode well for the upcoming employment situation report coming from the Labor Department later this week. The Employment Index has now shown expansion in 42 straight months.
14 of the 18 manufacturing industries surveyed reported growth, led by expansions in wood products and furniture and related products. Petroleum and coal products, followed by chemical products paced the industries that registered contraction.
"While the second half of 2013 looks promising, the first half is a mixed bag,” said a computer and electronics product company in the report, while a fabricated metal products company said “Automotive is still very strong.” Three of the ten comments from survey respondents were directed at the government. These were: “Medical reimbursements from insurance companies, particularly Medicare, are slowing,” “Reduced government spending in the defense sector lowers business output” and “Post-election in the U.S. – companies within the oil and gas sector are still waiting for signs of some regulatory certainty or stability.”
The markets didn’t exactly come out on fire at the opening bell (although the Dow did manage to eke ahead to touch another new all-time high at 14,605.72), but following the ISM report they united turned into the red. Two hours into the trading day, the Dow Jones Industrial Average is down by 40 points, the S&P 500 is off by 9 points and the Nasdaq is lower by 26 points, pulled lower in part by Apple, Inc. (AAPL) docking another 1.5 percent after falling the past three trading sessions.
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