by Jordan, Knauff & Company

The Jordan, Knauff & Company (JKC) Valve Stock Index was down 9.3 percent over the last 12 months, while the broader S&P 500 Index was even. The JKC Pump Stock Index also decreased 20.2 percent.

Manufacturing activity improved in March with the Institute for Supply Management’s Purchasing Managers’ Index (PMI) increasing to 51.8 percent from 49.5 percent in February, the first month showing expanding activity since last August.

Figure 1. Stock Indices from April 1, 2015, to March 31, 2016Figure 1. Stock Indices from April 1, 2015, to March 31, 2016. 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 New Orders Index increased 6.8 percentage points to 58.3 percent, the strongest reading since November 2014. Employment was the only sub-category to fall in March, registering 48.1 percent.

The U.S. gross domestic product (GDP) grew at a 1.4 percent annual pace in the last quarter of 2015. Consumers spent more than originally estimated, with spending increasing 2.4 percent from the previous quarter. Residential investment and federal government spending also contributed to the increase in GDP. For the full year, GDP growth was 2.4 percent, the same pace as 
in 2014.

The Commerce Department reported that U.S. corporate profits fell 11.5 percent in the fourth quarter compared with 2014 due to the impact of low oil and gas prices. Corporate profits were down 3.1 percent for the year.

Figure 2. U.S. energy consumption and rig counts.Figure 2. U.S. energy consumption and rig counts. Source: U.S. Energy Information Administration and Baker Hughes Inc.

The U.S. Energy Information Administration estimates that oil production from hydraulically fractured wells now contributes about half of total U.S. crude oil production. In 2000, approximately 23,000 wells produced less than 2 percent of the national total.

By 2015, the number of wells grew to an estimated 300,000, 
and production from those wells grew to more than 4.3 million barrels per day.

U.S. petroleum product exports continued to increase last year, increasing 467,000 barrels per day over 2014. Distillate fuel oil represents the largest component of the exports, with motor gasoline and propane following.

Figure 3. U.S. PMI and manufacturing shipmentsFigure 3. U.S. PMI and manufacturing shipments. Source: Institute for Supply Management Manufacturing Report on Business and U.S. Census Bureau

Major recipients of U.S. petroleum product exports continue to be Mexico and countries in Central and South America. High refinery production and the warm heating season raised U.S. distillate inventories above the five-year average.

On Wall Street, all the major indices advanced for the month of March with the Dow Jones Industrial Average, the S&P 500 Index and the NASDAQ Composite gaining of 7.1 percent, 6.7 percent and 6.8 percent, respectively. For the first quarter of the year, both the S&P 500 Index and the Dow Jones Industrial Average gained 0.8 percent and 1.5 percent, respectively, while the NASDAQ Composite declined 2.8 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.