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June 2016

Meidell: Today was (bad) Christmas for investors

By | Published Articles

Just like the disappointment of opening your presents on Christmas Day only to find that you didn’t get the Oscar Mayer Wiener Whistle you asked for, investors show their own style of disappointment when they don’t get what they expect.

U.S. investors woke up to worrisome news from overseas after both China and Germany released manufacturing data for May that was lower than analysts had expected. Where readings of 50 and above show expansion in the manufacturing sector, China’s Caixin Manufacturing PMI for May of 49.2, below the consensus expectation of 49.3, showed that China’s economy continues to shrink. This is also a concern on a global level, due to the effect China has on the global economy. However, investors can also be disappointed with a positive report, as was the case with the German Manufacturing PMI coming in at 52.1 for May. Though the report was solidly in expansion territory, consensus expectations for 52.4 threw cold water on the report, causing the German DAX to fall 0.57 percent on Wednesday.

U.S. stocks immediately gapped lower at the opening bell, as investors braced themselves for more bad news on the U.S. economy. The Down Jones Industrial Average was off more than 100 points in the first five minutes of trading. But to investors’ surprise, U.S. manufacturing reports released in the first 30 minutes of the day were much better than expected, causing the major market averages to halt their decline and begin moving higher. The ISM Manufacturing index reading for May of 51.3, was five-tenths higher than analysts had expected. The positives of the report indicated delivery delays possibly caused by strong demand, along with solid new order and export order activity.

By the market close, the major market averages had recovered their losses and were trading slightly in the green with the Standard & Poor’s 500 higher by 0.11 percent and the Nasdaq Composite up 0.08 percent.

Across the globe, the top-performing countries for the week were led by the Wisdom Tree India Earnings index, up 4.67 percent over the past five trading days, followed by the MSCI Taiwan index gaining 3.38 percent over the same period.