The Jordan, Knauff & Company (JKC) Valve Stock Index was down 20.6 percent over the last 12 months, while the broader S&P 500 Index was up 9.6 percent. The JKC Pump Stock Index also decreased 18.4 percent for the same time period.1

Figure 1. Stock indices from April 1, 2014, to March 31, 2015 (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.) Figure 1. Stock indices from April 1, 2014, to March 31, 2015 (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 Institute for Supply Management's Purchasing Managers' Index (PMI) decreased to 51.5 percent in March from 52.9 percent in February. The New Orders Index also decreased to 51.8 percent from 52.5 percent in February. The Prices Index increased to 39.0 percent from 35.0 percent. Ten of the 18 manufacturing industries surveyed reported growth in March with paper products, wood products, transportation equipment and fabricated metal products leading the growth. Apparel, textile mills, petroleum and coal products, and electrical equipment were all on the contraction side.

Lower oil prices have had both positive and negative effects, depending on the industry. A food and beverage respondent noted that "falling energies have helped on the cost side, while sales are getting a boost through improvements in consumer disposable income." At the same time, a computer and electronic products company suggested that oil prices are having a major effect on energy markets and, as a result, their business is slowing down.

In 2015, consumer expenditures on motor fuel are expected to be at their lowest levels in more than 10 years. Based on the U.S. Energy Information Administration (EIA) gasoline price forecast, the average U.S. household is expected to spend about $700 less on gasoline in 2015 compared to last year. During this year's summer driving season, the EIA is forecasting that gas prices will average $2.45 per gallon, compared with $3.59 last year.

Figure 2. U.S. energy consumption and rig counts (Source: U.S. Energy Information Administration and Baker Hughes Inc.)
Figure 2. U.S. energy consumption and rig counts (Source: U.S. Energy Information Administration and Baker Hughes Inc.)
Figure 3. U.S. PMI and manufacturing shipments
Source: Institute for Supply Management Manufacturing Report on Businesss®  and U.S. Census BureauFigure 3. U.S. PMI and manufacturing shipments
(Source: Institute for Supply Management Manufacturing Report on Businesss® and U.S. Census Bureau)

Crude oil production in the U.S. has increased in each of the last six years. Output in 2014 rose by 1.2 million barrels per day, or 16.2 percent, the highest percentage growth rate since 1940. This follows a period from 1985 to 2008 in which crude oil production fell in every year except one. Since 2012, the U.S. has been the world's largest producer of petroleum and natural gas hydrocarbons combined, exceeding the output of both the second and third largest producers—Russia and Saudi Arabia, respectively. With increases in production in both areas, the U.S. produced almost twice the petroleum and natural gas produced by Saudi Arabia last year. For both the U.S. and Russia, total production is almost evenly split between petroleum and natural gas, while petroleum makes up most of Saudi Arabia's output.

On Wall Street, all indices were down for the month of March. The Dow Jones Industrial Average fell 2.0 percent, the S&P 500 Index was down 1.7 percent, and the NASDAQ Composite declined 1.3 percent. Investors were concerned about the first quarter earnings of multinational companies due to the strength of the U.S. dollar.

For the first quarter of the year, the Dow Jones Industrial Average lost 0.3 percent, the S&P 500 Index gained 0.4 percent and the NASDAQ Composite rose 3.5 percent.

Reference
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.

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