Stocks Digging Themselves Out of the Hole
Updated from 11:05 a.m. EDT
Stocks on Wall Street were working their way up from early losses Thursday as an encouraging manufacturing report helped investors look past a raft of otherwise disappointing economic data.
The Dow Jones Industrial Average continued to see mixed trading, though recently it was 14 points higher at 12,912. The S&P 500 climbed 3 points to 1412, and the Nasdaq Composite tacked on 12 points to 2509.
Investors were bearish at the open but perked up after northeastern factory activity data showed vast improvement. The Philadelphia Fed Index came in at negative 15.6 for May -- still a sizable contraction, but far less egregious than last month's decline of 24.9, and better than the economists' consensus for negative 19."Overall the survey is soft," said Ian Shepherdson, chief U.S. economist with High Frequency Economics, in an emailed statement, "but its weakness has not been fully reflected in the one industrial survey that really matters, the [Institute for Supply Management] report." The ISM report is a crucial survey of nationwide manufacturing numbers. Sheperdson added that the Federal Reserve's industrial output numbers show that "manufacturing is now struggling, though it is certainly not in meltdown." The report revealed that industrial production fell 0.7% in April, worse than the 0.3% decline that had been expected. March was revised to show an increase of only 0.2%, rather than the 0.3% uptick that had been reported. "The decline in output ex-autos was broad, with falls in consumer goods, materials, construction supplies and business equipment," Shepherdson said. "The dollar value of business equipment produced -- a key indicator of capital spending -- fell a hefty 1.8%, after being flat for the past three quarters or so. Further declines would be very worrying." Still, said Tony Crescenzi, chief bond strategist at Miller Tabak and contributor to RealMoney.com, a sister site to TheStreet.com, those production numbers are "not a major surprise." "April's drop overstates the impact of the economy on output, as strikes in the automobile sector shaved three-tenths of a percentage point from total output," Crescenzi wrote. He also cited the fact that April saw a large 1.2% decline aggregate hours worked in the manufacturing sector. Shepherdson remains pessimistic. "The decline in output ex-autos was broad, with falls in consumer goods, materials, construction supplies and business equipment," he said in an emailed statement. "The dollar value of business equipment produced -- a key indicator of capital spending -- fell a hefty 1.8%, after being flat for the past three quarters or so. Further declines would be very worrying." Meanwhile, New York factory data -- the Empire State Index -- registered at negative 3.2 for May, down from a slight uptick in April and worse than break-even expectations. Capacity utilization was also a bit light, coming in at 79.7% compared with the 80.1% consensus forecast. Elsewhere on the economic docket, jobless claims were roughly in line with expectations, rising by 6,000 to 371,000. That was about 1,000 more than had been predicted. As the new day began, traders were greeted with word that CBS (CBS) would buy Internet media company CNET (CNET) for $1.8 billion. That news lifted CNET by more than 40%, but CBS was slipping 3.8%. Separately, General Electric (GE), a component of the Dow, is considering selling or parting ways with its appliances division, according to The Wall Street Journal. The unit could fetch $5 billion to $8 billion, the report said. Still, after a brief rise out of the gate, shares lately were slipping 0.7% at $32.28.
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