U.S. manufacturers took cautious strides ahead in July, according to a pair of economic reports Friday morning, but analysts say they're still stuck in the mud.
The Chicago purchasing managers' index, a measure of manufacturing sentiment in the Midwest, rose to 43.5 from 38 in July. Economists expected a reading of 39.8. A reading of greater than 50 is consistent with expansion in the manufacturing economy, while a level below 50 still reveals contraction.
Separately, factory orders increased 0.1%, bolstered by orders for nondurable goods, the Commerce Department said. Economists had expected a 0.5% decline. June orders were revised downward to a 2.9% decline from a 2.4% decrease, however.
Experts weren't impressed by the July numbers. "It would be a mistake to look at these numbers and state with confidence that manufacturers have bottomed," said John Lonski, an economist at Moody's.
Still, the major market indices were moving up. The Dow Jones Industrial Average was up about 25 points, or 0.3%, to 9945, while the Nasdaq Composite was ahead by 7 points, or 0.4%, to 1799. The S&P 500 was losing almost 3 points to 1132. Traders said the reaction was nothing more than a technical bounce, however.
"We were very oversold coming into the trading day," said Bob Basel, director of listed trading at Salomon Smith Barney. On Thursday, the Dow closed below 10,000 and the Nasdaq finished below 1800 for the first time since April 9. If those averages end higher today, it will mark the first winning session since Aug. 24.
The manufacturing sector has been contracting since August 2000. In March, the Chicago PMI fell to 35, its lowest level in more than a decade. While today's number shows progress, economists are wary.
"I would treat it cautiously," said Michael Moran, chief economist at Daiwa Securities America. "The Chicago series has been very volatile." Though the report is considered a decent forecaster of the national poll of purchasing managers due out on Tuesday, Moran's not so sure it will be this time.
Moran also has concerns about the factory orders report, since inventories fell. He said that signals companies are still uncomfortable with their supply. Separately, orders for durable goods fell 0.7% after a steep 2.5% drop in June. Orders for nondurable goods, which include chemicals and textiles, rose 1.1%.
"We're not poised for a breakout in manufacturing," said Moran. "The recovery will be gradual."
There has been no shortage of bad news from corporate America lately. On Thursday evening, chip equipment maker
said third-quarter bookings and shipments would come in on the low end of previous forecasts, because of weaker-than-expected demand for its products.
Earlier this week,
said it probably wouldn't turn a profit in the first quarter. Novellus was lately down $2.68, or 5.8%, to $44.03, while Sun was up 9 cents, or 0.63%, to $11.16.
In a separate report this morning, the University of Michigan's consumer sentiment index dropped to 91.5 from 92.4 in July, as individuals expressed worries about the future. Economists had forecast a consumer sentiment reading of 93.2. The preliminary results, released mid-month, came in at 93.5.
A gauge of consumers' attitudes about the future, within the sentiment index, fell to 85.2 in August. That's down from 88.4 in July and a preliminary reading of 88.3 earlier this month. The subindex on current conditions, a measure of how comfortable consumers feel about the here and now, rose to 101.2 in August from 98.6 in July. That was down slightly from a preliminary figure of 101.7.