The Jordan, Knauff & Company (JKC) Valve Stock Index was down 27.0 percent over the last 12 months, while the broader S&P 500 Index was down 1.5 percent. The JKC Pump Stock Index also decreased 26.7 percent for the same time period.1
The Institute for Supply Management's Purchasing Managers' Index (PMI) fell to 51.1 percent for the month of August compared with 52.7 percent in July. The New Orders Index decreased to 51.7 percent from 56.5 percent, while the Production Index fell 2.4 percentage points to 53.6 percent. Of the 18 manufacturing sectors reporting in the survey, 10 saw growth for the month, including textile mills, paper products and nonmetallic mineral products.
Figure 1. Stock indices from September 1, 2014, to August 31, 2015Source: 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 U.S. unemployment rate fell to 5.1 percent from 5.3 percent in August, the lowest level since April 2008. However, the pace of hiring slowed somewhat in August as 173,000 jobs were added. One-third of all new jobs reported in August were in the education and health services sector. Professional and business services, leisure and hospitality, and government also made significant gains. The manufacturing and mining sectors lost jobs. The U.S. has added an average of 212,000 jobs per month this year and is on pace to add more than two million jobs for the fifth year in a row.
The Commerce Department reported that total construction spending rose 0.7 percent in July compared with June to a seasonally adjusted annual rate of $1.08 trillion. This is the highest level since May 2008. Both residential and nonresidential private construction hit new post-recession highs. Government spending dropped in July after showing solid gains during the past months. Actual construction spending has been building over the year with an increase of 9.3 percent in the first seven months of the year compared with 2014.
Figure 2. U.S. energy consumption and rig countsSource: U.S. Energy Information Administration and Baker Hughes Inc.
Growing global oil inventories are putting downward pressure on crude oil prices. North Sea Brent crude oil spot prices averaged $58 per barrel through July of this year compared with $109 per barrel over the same period last year. According to the U.S. Energy Information Administration, the growth in global production of petroleum and other liquids has been larger than the growth in consumption since August 2014, resulting in an increase in the inventory of global liquids. It is estimated that total global inventories have grown by 2.3 million barrels per day through the first seven months of 2015. This is the highest level of stock through July since 1998. North Sea Brent crude oil prices averaged $47 per barrel in August.
On Wall Street, all indices were down for the month of August. The Dow Jones Industrial Average was down 6.6 percent, the S&P 500 Index declined 6.3 percent, and the NASDAQ Composite fell 6.9 percent. All industry sectors of the S&P 500 Index were down for the month, with the largest decline in the health care sector at 8.0 percent.
Figure 3. U.S. PMI and manufacturing shipmentsSource: Institute for Supply Management Manufacturing Report on Business\'ae and U.S. Census Bureau
Investors were concerned that an economic slowdown in China would result in a global slowdown.
Falling oil prices and the uncertainty surrounding the timing of the Federal Reserve Bank's interest rate increase also had an effect on markets.
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.