The Jordan, Knauff & Company (JKC) Valve Stock Index was up 10.4 percent over the last 12 months, while the broader S&P 500 Index was up 17.8 percent. The JKC Pump Stock Index was up 26.5 percent for the same time period.1
The Institute for Supply Management’s Purchasing Managers’ Index (PMI) declined 5.2 percentage points in January to 51.3 percent from December’s 56.5 percent. All the components of the index were down from the previous month with the New Orders Index falling 13.2 percent. Despite the overall numbers, 11 of the 18 industries surveyed reported growth during the month.
Figure 1. Stock indices from Feb. 1, 2013, to Jan. 31, 2014. Source: Capital IQ and JKC research. Local currency converted to USD using historical spot rates. The JKC Pump and Valve Stock Indices include a select list of publicly-traded companies involved in the pump and valve industries weighted by market capitalization.
The Commerce Department reported that the U.S. gross domestic product for the fourth quarter of 2013 grew at a 3.2-percent annual rate. With a third-quarter reading of 4.1 percent, the last six months of 2013 showed the strongest second half since 2003. Fourth-quarter growth was driven by stronger consumer spending, up 3.3 percent, and rising exports. Company investments increased at a 3.8-percent annual rate, with spending on equipment growing at a 6.9-percent rate. The public sector weighed down economic output in the quarter with overall government spending falling at a 4.9-percent pace and federal spending falling 12.6 percent.
Figure 2. U.S. energy consumption and rig counts. Source: U.S. Energy Information Administration and Baker Hughes Inc.
Rising crude oil production in the U.S. contributed to relatively stable global crude oil prices in 2013. West Texas Intermediate (WTI) spot prices averaged $98 per barrel in 2013, the highest annual average since 2008, up 4 percent from 2012. Transportation constraints that put downward pressure on WTI prices were alleviated by new pipeline and railroad infrastructure improvements. Growing more than the combined increases of the rest of the world and reaching its highest level in 24 years, U.S. crude oil production increased 1 million barrels per day last year. China surpassed the U.S. as the world’s largest importer of crude oil in 2013 and accounted for almost one third of the growth in global crude oil demand.
Figure 3. U.S. PMI index and manufacturing shipments. Source: Institute for Supply Management Manufacturing Report on Business® and U.S. Census Bureau.
On Wall Street, the Dow Jones Industrial Average declined 5.3 percent in January. The S&P 500 Index dropped 3.6 percent, and the NASDAQ Composite Index fell 1.7 percent. The markets were affected by turbulence in emerging markets as investors reevaluated the risk associated with them. Concern about global economic growth as the Chinese economy shows signs of slowing more than expected was also a factor. The longer term outlook for U.S. stocks is more upbeat with the latest corporate earnings reports showing growth to be stronger than expected.
1. The S&P Return figures are provided by Capital IQ.
These materials were prepared for informational purposes from sources that are believed to be reliable but which could change without notice. Jordan, Knauff & Company and Pumps & Systems shall not in any way be liable for claims relating to these materials and makes no warranties, express or implied, or representations as to their accuracy or completeness or for errors or omissions contained herein. This information is not intended to be construed as tax, legal or investment advice. These materials do not constitute an offer to buy or sell any financial security or participate in any investment offering or deployment of capital.