Jordan, Knauff & Company is an investment bank in Chicago, Ill., that provides merger and acquisition advisory services to the pump, valve and filtration industries.
The Jordan, Knauff & Company (JKC) pump and valve stock indices outperformed the broader S&P 500 Index. The JKC Valve Stock Index was up 37.9 percent over the last 12 months, above the broader S&P 500 Index, up 28.5 percent. The JKC Pump Stock Index continues its upward trend, ahead 61.7 percent for the same time period.
Manufacturing sector economic activity expanded in June for the 23rd consecutive month. The Purchasing Managers Index rose from 53.5 to 55.3, providing a boost to the industry and the economy after a nearly seven-point decline in May. Factory orders rose 0.8 percent in May, nearly offsetting April's 0.9 percent decline. This suggests that U.S. manufacturing may soon return more stable as impacts of the Japanese tsunami and earthquake fade. Year-over-year gains in factory orders remain at a solid 13.3 percent.
Figure 1. Stock Indices from July 2010 to June 2011
Despite renewed optimism, in June, few jobs were added, and the unemployment rate rose to 9.2 percent, 2011's highest level. The Labor Department reported that the economy gained just 18,000 jobs in June, the weakest month since September 2010. Private businesses added only 57,000 jobs. Government employment fell by 39,000.
Consumer confidence fell in June, as Americans grappled with slow job growth, higher prices and economic uncertainty, which impacted spending, with both durable and nondurable goods purchases down in May. The Conference Board reported that consumer confidence fell to 58.5 in June (versus 61.7 in May and 66.0 in April).
Figure 2. U.S. Energy Consumption and Rig Counts
World crude oil prices initially fell after the International Energy Agency's (IEA) June 23 announcement that its member countries would release up to 60 million barrels from strategic reserves but then rose above the pre-announcement levels. Although the IEA release will provide additional supply, oil markets are expected to tighten through 2012. West Texas Intermediate crude oil spot prices fell from an average of $110 per barrel in April to $96 in June. U.S. and worldwide rig counts continued to increase in June. Worldwide counts increased 64 percent. In June, 1,863 rigs in the U.S. were exploring for or developing oil or natural gas and 3,257 worldwide.
On Wall Street, after an upbeat start, U.S. markets experienced a six-week sell-off through mid-June, the longest run since October 2002. In the final week of June, markets surged with the Dow Jones Industrial Average gaining 4 percent over the final four days. The second quarter was rough. Soft economic data sparked concerns of a U.S. economic slowdown. Going forward, investors will be looking at second quarter corporate earnings reports and the effect of the end of the Federal Reserve's quantitative easing policy.
Figure 3. U.S. PMI Index and Manufacturing Shipments
Pumps & Systems, August 2011
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.