Manufacturing Hanging In There

Stocks started out with a big implosion with the Dow working its way down over 100 points, but ended up 32 points. This is another example of a sideways move. There was no news today to move markets – just a big nervousness about the price of oil and fear that jobs are drying up in the US.

Bonds, on the other hand, drove the 10 Year Treasury rate down to 3.90%, and then ended at 3.99%. I fear that this was the last gasp of the bond market, and from now on, interest rates will be rising – but in a volatile fashion. May bonds RIP.

The dollar contined being weak, but just a little weak – mostly sideways.

Oil hit another ALL TIME HIGH of $143.05 today, and gasoline just remained high.

In the news today…..

Wachovia Bank stopped offering negative amortizing mortgages. They are retreating, and trying to control their risk profile. Good for them.

CIT is going to sell its mortgage business and mobile home business to concentrate on commercial finance – it’s core business. It will also be writing off $2B in the process. More bad loans; drip, drip, drip.

Oil is up 46% in 2008 – just 6 months. If that’s not shocking enough, CORN is up 66% in 2008. I guess that means I’ll be cutting back on popcorn at the movies.

Manufacturing activity came in at an index value of 50.2. Remember that anything above 50 is “growth”, and vice versa. So today’s number just shows that manufacturing is just hanging in there, and exports are really saving the bacon of manufacturing.

Here are today’s numbers:
Dow Jones 30 Industrial - 119382 (up 32 points)
10 Year Treasury Bond - 3.98% (up 0.01%)
Euro - $1.5788
Gold - $944 (up $16)
Oil - $140.97 (up $0.97)
Gasoline - $3.51 (up $0.01)

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This entry was posted on Tuesday, July 1st, 2008 at 4:39 pm and is filed under U.S. Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

3 Responses to “Manufacturing Hanging In There”

David on July 1st, 2008 at 5:04 pm

Yep, this feels like a slow news day. The market just moves up and down with no real direction. The world economy can only be headed towards slower growth.

I applaud Wachovia’s choice to exit the option ARM business. This whole loan product is pretty much a guaranteed failure so it makes sense to drop it. BTW, if you have time, search out the option ARM reset charts. Once those loans start reseting, then we’ll have a new storm of foreclosures hitting the hot markets and mid-priced homes. This will affect the high FICO borrowers who mainly bought way overvalued RE in FL, NV, AZ, and CA. Expect those home prices to plummet. I have been looking for an entry point on purchasing Wachovia puts. Not only do they have a large option ARM porfolio that will crash, but they have a credit card business that is seeing rising default rates too.

BTW, has anyone seen the Shanghai index chart? It looks like the Nasdaq bubble crash from 2001-2002.
Tom Harvey on July 1st, 2008 at 6:21 pm

Hi David,

I’m glad you brought up the Shanghai market. The Chinese are trying to slow down their economy, raising gasoline prices, collecting too many US dollars, hoping for a successful Olympics, etc. Their economy is looking like a slowdown in progress, and it wouldn’t take much to make an overbought stock market crash violently.

Tom
George on July 2nd, 2008 at 12:01 pm

Growth rates in manufacturing are rising, but so are costs. A lot of manufacturing and process engineering companies are still trying to see if it levels out. Nevertheless, it’s good news for the economy as a whole.