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Tag: Machinery/Industrial Goods

  • U.S. manufacturing sector shrinks for 14th straight month in December

    U.S. manufacturing sector shrinks for 14th straight month in December

    The numbers: A closely watched index that measures U.S. manufacturing activity rose by 0.7 percentage point to 47.4 in December, according to the Institute for Supply Management on Wednesday.

    Economists surveyed by the Wall Street Journal had forecast the index to rise to 47.2. 

    Any number below 50 reflects a shrinking economy. Manufacturing has contracted for 14 straight months.

    Key details: The key new-orders index fell 1.2 percentage points to 47.1 in December.

    Production rose 1.8 percentage points to 50.3 from the prior month. Employment picked up slightly but remained below the 50-percentage-point threshold.

    Prices fell 4.7 percentage points to 45.2. That’s the biggest drop since May 2023. Inventories were down 0.5 percentage point to 44.3 in December.

    Customer inventories dipped back below 50 last month to 48.1 in December.

    Only one industry, primary metals, reported growth in December, while 16 reported contractions.

    Layoffs picked up in December, concentrated in the computer and electronics, machinery, and food and beverage sectors.

    Big picture: The contraction in manufacturing is the longest since 2000-01, after the dot-com bubble exploded, said Jay Hawkins, senior economist at BMO Capital Markets.

    Economists said that depressed capital spending has been the key drag on the factory sector, along with weak global trade. They expect that a sharp drop in long-term interest rates will improve the picture, but the change won’t happen overnight.

    What the ISM said: Tim Fiore, chair of the ISM manufacturing survey committee, was relatively upbeat about the data. He said the sector was closing the year in a “really good position” and forecast that the ISM factory index would rise above the 50-percentage-point threshold by March. Fiore said he also expects the inventory number to pick up in coming months.

    What economists said: “The survey indicates that conditions in the factory sector remain unusually weak and that output is likely to continue declining for at least a few more months,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.

    Market reaction: Stocks
    DJIA

    SPX
    were lower in early trading on Wednesday, while the yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    rose to just below 4%.

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  • Health of several key sectors, including the U.S. consumer, plus an outlook from Fed’s Powell on radar this coming week

    Health of several key sectors, including the U.S. consumer, plus an outlook from Fed’s Powell on radar this coming week

    Recession fears are rising. Nothing beats fear better than good information and that’s what we will get this week. Investors and economists will get good insight into the mood of U.S. consumers and hear the last words of Federal Reserve Chair Jerome Powell ahead of the central bank’s next interest-rate meeting on Dec. 12-13.

    November consumer confidence

    Tuesday, 10:00 a.m. Eastern

    Economists surveyed by the Wall Street Journal expect that consumer’s view on the outlook have soured over the past few weeks. Geopolitical…

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  • U.S. economy growing only at a subdued rate in early November, S&P Global says

    U.S. economy growing only at a subdued rate in early November, S&P Global says

    The numbers: The U.S. economy expanded but at a relatively subdued pace in early November, latest data from S&P Global show.

    The S&P Global “flash” U.S. services index rose to 50.8 in November from 50.6 in the prior month, the highest level in four months. Economists surveyed by the Wall Street Journal had forecast a reading of 50.2.

    On the…

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  • Here’s what Germany should be called instead of the ‘sick man of Europe,’ says Deutsche Bank

    Here’s what Germany should be called instead of the ‘sick man of Europe,’ says Deutsche Bank

    The hurdles facing Germany’s economy in recent years have been plentiful, but the “sick man of Europe,” label is unfair, say Deutsche Bank strategists, who see promise for investors in the region’s biggest economy.

    Contrary to the rest of the eurozone, Germany has only managed to get back to its pre-COVID growth level, yet a title of “sore athlete” is more accurate, say Maximilian Uleer, head of European equity and cross asset strategy and Carolin Raab, European equity and cross asset strategists, in a note to clients that published Friday.

    “Germany has been facing multiple challenges, from rising energy costs, its high manufacturing exposure, to weak demand from its export destinations. Some of the challenges are ‘homemade’ and might persist, while others could start to unwind and soon turn into opportunities,” the pair said.

    Germany’s economy is the worst-performing of the developed world this year, with both the International Monetary Fund and European Union forecasting contractions in growth.

    Read: Germany’s economy struggles with an energy shock that’s exposing longtime flaws

    But the strategists say economic growth is a poor proxy for German equity performance. The German DAX index
    DX:DAX
    is up 18% since the end of 2019. DAX constituents generate just 18% of their revenues domestically, compared to 22% from the U.S. and 15% from China.

    Across the broader HDAX index of 100 members, manufacturing, information technology and financial services are the main contributors to equity performance. That’s as public services, trade, business services and real estate, all of which contributed significantly to GDP over the past four years, are underrepresented in the indexes.

    Germany has also managed to grow its real GDP by 26% over the past 20 years , and keep its debt-to-GDP ratio stable, while the eurozone (including Germany) has seen that debt ratio climb 30% since 2003. The short term has seen lower growth since COVID-19, and rising leverage owing to fiscal support measures to mitigate the pandemic and the war in Ukraine.

    Again, the strategists see a silver lining. “Going forward, in our view, Germany has bigger leeway with regards to its fiscal support capacity, as its absolute debt/GDP ratio remains one of the lowest among the eurozone members,” said Uleer and Raab.


    *Since 2003: Q3 2003-Q2 2023 / since Covid: Q4 2019-Q2 2023. Source: Bloomberg Finance LP, Deutsche Bank Research 09/20/2023

    Among the country’s big hurdles is rising energy costs, with the pair noting that the country’s net-zero goals are laudable, but pose a “substantial challenge” to its energy-intensive industries. Power prices remain substantially higher than three years ago and are double the cost of those in the U.S.

    Also read: Inside Germany’s industrial-sized effort to wean itself off Putin and Russian natural gas

    “This price differential, combined with stronger fiscal support for energy-intensive companies in the U.S. via the Inflation Reduction Act, weigh on the competitiveness of German corporates,” said the strategists.

    As for opportunities, China’s reopening remains a positive for DAX companies, though that country also seems to be making slow progress. Chinese households are sitting on massive savings still waiting to be spent, said the strategists. They advise investors to wait for data that confirms a stabilization of the country’s bumpy property market before they would turn more positive.

    Overall, Deutsche Bank expects inflation to normalize in the coming 12 months and low growth in 2024, but a rebound in 2025.

    Plus: A 1-liter stein of beer at Munich’s famed Oktoberfest will cost nearly $15 this year

    And what’s priced into the DAX already? Even after a gain of 12% this year so far — French
    FR:PX1
    and Greek stocks
    GR:GD
    — are beating Germany by a respective 20% and 30% — the index is still cheap and trading at a 20% discount to its 10-year average on a forward one-year price/earnings basis. Germany can count on stronger U.S. data, even if Europe continues on a weak path.

    “We expect the DAX to hold up in 2024, and do not forecast the index to underperform, despite lower German GDP growth as compared with the rest of the eurozone,” they said.

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  • UAW strike: Ford, GM, Stellantis record profits haven’t been shared fairly with workers, Biden says

    UAW strike: Ford, GM, Stellantis record profits haven’t been shared fairly with workers, Biden says

    President Joe Biden on Friday offered his support to the United Auto Workers, as he addressed their strike aimed at the Big Three auto makers.

    Auto companies have seen record profits because of the “extraordinary skill and sacrifices” of UAW workers, Biden said in a brief speech at the White House.

    “Those record profits have not been shared fairly, in my view, with those workers,” the president added.

    “The companies have made some significant offers, but I believe they should go further to ensure record corporate profits mean record contracts for the UAW,” he also said.

    Biden gave his remarks after about 12,700 workers went on strike early Friday as their union and the Big Three automakers failed to reach an agreement before a contract expired.

    It’s a targeted strike at a Ford Motor 
    F,
    -0.08%
    plant in Michigan, a General Motors 
    GM,
    +0.86%
    plant in Missouri and a Stellantis NV 
    STLA,
    +2.18%
    plant in Ohio.

    The UAW so far has not endorsed Biden’s re-election bid, even as the AFL-CIO and other big unions have lined up behind the Democratic incumbent.

    The presidential race in 2024 could be a rematch of 2020’s contest between Biden and former President Donald Trump, who has won over some union households that historically have backed Democrats like Biden rather than Republicans.

    See: Here are the Republicans running for president

    Biden got more support than Trump from union households in the battleground states of Michigan and Wisconsin in 2020, but Trump got more support from such households in Ohio and Pennsylvania, according to Edison Research exit polls.

    Trump has seized on concerns that the car industry’s shift toward electric vehicles
    CARZ,
    which the Biden administration has promoted, could hurt American workers. “The all Electric Car is a disaster for both the United Auto Workers and the American Consumer,” the former president said Friday in a post on his Truth Social platform.

    On Friday, Biden said he hopes the UAW and car companies “can return to the negotiation table to forge a win-win agreement,” and he said he’s sending two administration officials to Detroit — Julie Su, the acting secretary of labor, and Gene Sperling, a senior adviser.

    GM posted a 2022 net profit of $11.04 billion, up from $10.38 billion in 2021, while Ford recorded a 2022 net profit of $7.62 billion, up from $6.43 billion in the prior year. For Stellantis, the parent company for brands such as Chrysler, Dodge and Jeep, last year’s net profit was $17.83 billion, up from $15.12 billion.

    UAW President Shawn Fain said in a statement after Biden’s speech that union members “agree with Joe Biden when he says ‘record profits mean record contracts.’” 

    Fain also said: “Working people are not afraid. You know who’s afraid? The corporate media is afraid. The White House is afraid. The companies are afraid.”

    Now read: Tesla may be the winner of the Big Three labor woes

    And see: Will the UAW strike push up car prices?

    Plus: UAW strike to have limited impact on Big Three, Fitch says

    Claudia Assis contributed.

     

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  • U.S. economy seen growing at about a 2.2% annual rate in the July-September quarter, according to real-time New York Fed estimate

    U.S. economy seen growing at about a 2.2% annual rate in the July-September quarter, according to real-time New York Fed estimate

    The U.S. economy could expand at about a 2.2% annual rate in the current quarter, according to a revamped real-time estimate from the New York Federal Reserve released Friday.

    According to the weekly New York Fed’s Staff Nowcast, the economy has been on an upward trend since late July.

    The regional Fed bank had discontinued the real-time estimate during the pandemic. The New York Fed said the series will now be available weekly.

    The New York Fed’s estimate is much lower than the Atlanta Fed’s GDPNow model, which shows growth could expand at a 5.6% annual rate in the current quarter.

    Economists say the strength of the economy will be critical going forward in deciding whether the Federal Reserve needs to continue to raise its policy interest rate to cool inflation.

    The Fed has been expecting the economy to slow in the second half of the year. Fed officials forecast only 1% growth for 2023. In the first six months of the year, U.S. gross domestic product is averaging about a 2% growth rate.

    If the economy reaccelerates, it is likely that inflation will also move higher. Fed officials had been hoping that slower economic growth would continue push down inflation.

    Faster growth means “you are probably going to get some inflation numbers that aren’t going to be as good as people were anticipating,” said James Bullard, the former president of St. Louis Fed president and now dean of Purdue’s business school.

    “There is some risk that the Fed will have to go a little bit higher” even than the one more interest rate hike that the central bankers have penciled in this year, he said, in a recent CNBC interview.

    The first official government estimate of third-quarter growth won’t be released until Oct. 26.

    The picture of the health of the economy painted by U.S. GDP statistics can change quickly.

    The growth estimates for the first half of the year could be revised at the end of September when the Commerce Department releases benchmark updates to GDP data.

    The sharp revisions are one of the reasons why the Fed typically pays more attention to the unemployment rate and the inflation data.

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  • U.S. factory orders plunge in July after four straight gains

    U.S. factory orders plunge in July after four straight gains

    Orders for U.S. manufactured goods fell a sharp 2.1% in July, the Commerce Department said Tuesday. This is the first decline after four straight monthly gains.

    Economists surveyed by the Wall Street Journal were expecting a 2.3% fall in July.

    Excluding transportation, orders rose 0.8% in July after a 0.3% gain in the prior month.

    Economists said that higher interest rates are putting pressure on business equipment spending.

    Durable-goods orders fell 5.2 % in July, unrevised from the data that was released on Aug. 24. Non-durable goods orders rose 1.1%. 

    Orders for nondefense capital goods, excluding aircraft, rose 0.1% in July, also unrevised from prior estimate. 

    U.S. stocks
    DJIA

    SPX
    were trading lower on Tuesday following the long holiday weekend.

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  • 3M charged with violating Foreign Corrupt Practices Act in China, pays $6.6M settlement

    3M charged with violating Foreign Corrupt Practices Act in China, pays $6.6M settlement

    3M Co.
    MMM,
    +0.46%
    agreed to pay disgorgement plus prejudgment interest totaling $4.58 million and a $2 million civil penalty for charges that it violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act (FCPA) in its business activities in China, the Securities and Exchange Commission said Friday. The SEC’s order found that 3M’s Chinese subsidiary paid about $1 million for at least 24 trips for Chinese government officials that included tourism activities as part of efforts to persuade them to buy 3M products, from at least 2014 to 2017. Without admitting or denying the findings, 3M agreed to cease and desist from future violations.  3M stock was up by 0.1% on Friday, while the S&P 500
    SPX,
    +0.67%
    rose fractionally.

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  • Durable-goods orders rise for third month in a row — if Boeing is taken out of the equation

    Durable-goods orders rise for third month in a row — if Boeing is taken out of the equation

    The numbers: Orders for long-lasting goods rose in July for the third month in a row if recent ups and downs at Boeing are set aside, suggesting the struggling industrial side of the U.S. economy may have stabilized.

    Durable-goods orders increased 0.5% in July if transportation — automobiles and planes — are excluded. Boeing
    BA,
    -3.16%
    orders often seesaw in the summer months and distort the true condition of U.S. manufacturing.

    Headline orders, which include transportation, sank by 5.2% last month, the government said Thursday.

    Economists polled by the Wall Street Journal had forecast a 4.1% drop in July following a 4.4% spike in June. The topsy-turvy results in the past two months are almost entirely due to Boeing.

    A better measure of the health of U.S. manufacturing, known as core orders, edged up 0.1% in July. That figure omits defense and transportation and is a proxy for broader business investment.

    Business investment is running slightly ahead of last year’s pace, but it has weakened considerably, and many manufacturers are treading water.

    Key details: Orders for commercial planes soared 71% in June and sank 44% in July, explaining the wildly divergent headline numbers in the past two months.

    Orders for new cars rose 0.8% in July.

    The transportation segment is a large and volatile category that often exaggerates the ups and downs in manufacturing.

    Outside the transportation sector, new orders rose in most major categories.

    Business investment has tapered off since last year, however, and companies have become more cautious in the face of rising interest rates, still-high inflation and a shift in consumer spending toward services.

    Durable goods are items like planes, cars, appliances and computers. Orders rise in an expanding economy and shrink in a contracting one.

    Big picture: Maybe the industrial side of the economy has hit bottom, and maybe it hasn’t. Getting a clear picture might have to wait until interest rates stop rising.

    Higher borrowing costs typically stunt the economy and discourage businesses from hiring, spending and investing.

    Looking ahead: “Businesses are showing caution amidst the higher rate environment and what it means for demand down the line,” said economist Ali Jaffery at CIBC Economics.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.28%
    and S&P 500
    SPX,
    +0.24%
    were set to open mixed in Thursday trades.

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  • Consumers seeing substantial improvement in U.S. economy over past 3 months: University of Michigan survey

    Consumers seeing substantial improvement in U.S. economy over past 3 months: University of Michigan survey

    The numbers: The University of Michigan’s gauge of consumer sentiment inched down to a preliminary August reading of 71.2 after hitting a 22-month high of 71.6 in the prior month.

    Economists polled by the Wall Street Journal had expected sentiment to inch up to a 71.7 reading in August.

    Another key part of the report is the U. of M. measure of inflation expectations.

    According to the report, Americans’ expectations for overall inflation over the next year slipped to 3.3% in August from 3.4% in the prior month, while expectations for inflation over the next 5 years inched down to 2.9% from 3%.

    Key details: According to the Michigan report, a gauge of U.S. consumers’ views on current conditions rose to to 77.4 in August from 76.6 in the prior month, while a barometer of their future expectations fell to 67.3 from 68.3.

    Big picture: Sentiment has been boosted by waning recession fears and disinflation in grocery store prices.

    What the University of Michigan said: “Consumer sentiment was essentially unchanged from July, with small offsetting increases and decreases within the index.  In general, consumers perceived few material differences in the economic environment from last month, but they saw substantial improvements relative to just three months ago,” said Joanne Hsu, the director of University of Michigan consumer surveys.

    Market reaction: Stocks
    DJIA

    SPX
    were mixed in early trading Friday while the yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    rose to 4.12%, the highest level since the spike last week after Fitch Ratings downgraded the U.S. credit rating.

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  • U.S. wholesale prices surprise to the upside in July, PPI shows

    U.S. wholesale prices surprise to the upside in July, PPI shows

    The numbers: The U.S. producer price index rose 0.3% in July, the Labor Department said Friday, up from a revised flat reading in June and the largest gain since January.

    Economists polled by The Wall Street Journal had forecast a 0.2% advance.

    The core producer price index, which excludes volatile food, energy prices, and trade services rose 0.2 in July, up from a 0.1% gain in the prior month. This is the largest increase since February.

    Key details: Over the past year, headline producer price inflation was running at a 0.8% rate in July, up from 0.2% in the prior month.

    Core prices are up 2.7% from a year earlier, matching the gain in June. Core PPI prices were running at a 5.8% rate in July 2022.

    A big part of the increase in producer prices was in the services sector.

    The cost of services rose 0.5% last month, up from a 0.1% drop in June. This is the largest increase in a year. The increase was led by a 7.6% gain for portfolio management.

    The cost of goods rose 0.1% in July after a flat reading in the prior month.

    Energy prices were flat in July, down sharply from a 0.7% gain in the prior month.

    Wholesale food prices jumped 0.5% after a 0.2% fall in the prior month.

    Further back on the production line, prices for intermediate goods fell 0.6%, the sixth straight monthly decline.

    Big picture: Price pressures have been diminishing at the producer level much faster than at the consumer level. Economists are watching the inflation data closely to see if the July interest rate hike by the Federal Reserve was the last hike of the cycle.

    What are they saying? “In short, PPI surprised to the upside in July. While we do not expect further rate hikes this year, if inflation surprises to the upside and the labor market and growth do not slow, another increase in interest rates cannot be ruled out in 2023,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

    Market reaction: U.S. stocks
    DJIA

    SPX
    were set to open lower on Friday after the stronger-than-expected PPI data. The yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    rose to 4.12%.

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  • U.S. economy grows at slowest pace in 5 months. Inflation ‘sticky,’ S&P says

    U.S. economy grows at slowest pace in 5 months. Inflation ‘sticky,’ S&P says

    The numbers: The U.S. economy grew at the slowest pace in five months in July, a pair of S&P surveys showed, and pointed to weaker conditions later in the year.

    The S&P flash U.S. services-sector index fell to 52.4 from 54.4 in the prior month. That’s the lowest reading since February.

    Most Americans are employed on the service side of the economy, in areas such as technology, healthcare, finance and hospitality.

    The S&P U.S. manufacturing-sector index, meanwhile, rose to 49 from 46.3, but it has been negative for months.

    The S&P Global surveys are among the first indicators each month to provide an assessment of the health of the economy. Any number above 50 signals expansion, while numbers below 50 point to contraction.

    One caveat: The S&P Global surveys have been more negative this year than other indicators of the U.S. economy.

    Key details: New orders, a sign of demand, rose slightly but were relatively soft. Hiring was also the weakest since January.

    Prices continued to rise for both raw materials and labor.

    “The stickiness of price pressures meanwhile remains a major concern,” said Chris Williamson, chief business economist at S&P Global. “[F]urther falls in the rate of inflation below 3% may prove elusive in the near term.”

    Big picture: The large service side of the economy is keeping the U.S. forging ahead, but it might be losing some steam. The Federal Reserve is expected to raise interest rates again this week, and higher borrowing costs have trimmed the sails of the economy.

    Manufacturers, for their part, are lagging well behind and arguably are already in a recession of sorts.

    Not just in the U.S., either. Manufacturers are struggling even more in Europe and other parts of the world as consumers shift spending to services from goods.

    Read: Eurozone Economy Contracts Further in July, PMIs Suggest

    A recession still appears far off, however. A new survey of business economists shows that 71% think a U.S. downturn is at least a year away.

    Looking ahead: “July is seeing an unwelcome combination of slower economic growth, weaker job creation, gloomier business confidence and sticky inflation,” Williamson said. “Business optimism about the year-ahead outlook has deteriorated sharply to the lowest seen so far this year.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.52%
    and S&P 500
    SPX,
    +0.40%
    rose in Monday trades.

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  • U.S. economy running close to 2% growth rate in second quarter, S&P says

    U.S. economy running close to 2% growth rate in second quarter, S&P says

    This version corrects the manufacturing PMI data which fell to a six-month low of 46.3 in June from 48.4 in the prior month.

    The numbers: The S&P Global “flash” U.S. service sector activity index fell to a 54.1 in June from 54.9 in the prior month, a two-month low. 

    Economists surveyed by the Wall Street Journal has forecast a reading of 53.3.

    The S&P Global “flash” U.S. manufacturing sector index, meanwhile, slid to a six-month low of 46.3 from 48.4 in May. Economists had expected a 49 reading. 

    Readings above 50 signifies expansion; below that, contraction.

    Key details: In the services sector, new orders increased at a strong rate in June. The pace of expansion was close to May’s 13-month high.

    On the other hand, manufacturers recorded the fastest rate of contraction in new orders since last December. They linked the drop to muted consumer confidence. Foreign client demand was also subdued.

    Inflation was seen as moderating. The overall rate of selling prices for goods and services dropped to the lowest level since late 2020.

    Big picture: The S&P PMIs try to look ahead at the health of the economy, a critical question with even Federal Reserve officials saying that the outlook for the U.S. is hidden in a fog.

    A composite output index from S&P showed the fifth straight month of increases in private sector activity.

    What S&P Global said: “The overall rate of expansion of business activity in the
    US remained robust in June, consistent with GDP rising at a rate of 1.7% to put second quarter growth in the region of 2%,” said Chris Williamson, chief business economist at S&P Global.

    Market reaction: Stocks
    DJIA,
    -0.65%

    SPX,
    -0.77%
    opened lower on Friday on talk of more interest rate hikes from global central banks. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.741%
    fell to 3.72%.

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  • New York Empire State, Philadelphia Fed factory indexes mixed but show signs of optimism

    New York Empire State, Philadelphia Fed factory indexes mixed but show signs of optimism

    The numbers: Two U.S. regional gauges of manufacturing sentiment showed signs in June that they may be improving after a rough patch, according to data released Thursday.

    The Philadelphia Federal Reserve’s manufacturing index slipped further to a reading of negative 13.7 in June from negative 10.4 in the prior month, but economists had expected a reading of negative 14.8, according to a Wall Street Journal survey of economists. This is the tenth straight negative reading.

    The…

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  • April U.S. factory orders rise for fourth gain in five months

    April U.S. factory orders rise for fourth gain in five months

    Orders for manufactured goods rose 0.4% in April, the Commerce Department said Monday. It is the fourth increase in factory-goods orders in the past five months.

    Economists surveyed by the Wall Street Journal were expecting a 0.6% rise.

    The gain was led by transportation equipment. Excluding that sector, orders were down 0.2%.

    Durable-goods orders rose 1.1% in April, unrevised from the initial estimate last week. The advance durable-goods data is always released ahead of the full report. Nondurable-goods orders fell 0.1% in April.

    Orders for nondefense capital goods, excluding aircraft, rose a revised 1.3% in April, down slightly from the prior estimate of a 1.4% increase. The gain was led by computers and machinery.

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  • Circor’s stock rockets toward 4-year high after buyout deal with KKR valued at $1.6 billion, including debt

    Circor’s stock rockets toward 4-year high after buyout deal with KKR valued at $1.6 billion, including debt

    Shares of Circor International Inc.
    CIR,
    +8.46%
    rocketed 49.2% toward a four-year high in premarket trading Monday, after the flow control products company announced a deal to be acquired by KKR & Co. Inc.
    KKR,
    +2.29%
    in a cash deal valued at $1.6 billion, including debt. KKR’s stock was still inactive ahead of the open. Under terms of the deal, Circor shareholders will receive $49 for each Circor share they own, which represents a 54.7% premium to Friday’s closing price of $31.67, and implies a market capitalization for Circor of $999.1 million. The deal, which is expected to close in the fourth quarter of 2023, follows a strategic review Circor initiated in March 2022. “We believe that this transaction and the immediate cash value it will provide to Circor’s stockholders best achieves the Board’s goal of unlocking the significant incremental value within Circor for its stockholders,” said Circor Chairman Helmuth Ludwig. Circor’s stock has soared 32.2% year to date through Friday, while KKR shares have run up 15.5% and the S&P 500
    SPX,
    +1.45%
    has advanced 11.5%.

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  • Cummins spinoff Atmus Filtration’s stock soars 14% in trading debut

    Cummins spinoff Atmus Filtration’s stock soars 14% in trading debut

    Atmus Filtration Technologies Inc.’s stock soared 14% Friday in its trading debut, after the Cummins Inc. spinoff priced its initial public offering in the middle of its proposed price range.

    The Nashville, Tenn.-based company sold 14.1 million shares priced at $19.50 each to raise $275 million. With 83.3 million shares to be outstanding after the deal, the company’s valuation is $1.6 billion.

    The stock
    ATMU,
    +11.90%
    is trading on the New York Stock Exchange under the ticker ATMU. Goldman Sachs and JPMorgan Chase were lead book-running managers on the deal, with 10 other banks acting as co-managers.

    Although the company is issuing primary shares, Atmus will not receive any of the IPO proceeds; all of the proceeds will go to debt-for-equity exchange parties, namely underwriters Goldman Sachs and JPMorgan, and will indirectly pay down parent Cummins’
    CMI,
    +1.03%
    debt, according to the filing documents.

    Atmus makes products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power-generation vehicles and equipment, mostly under the Fleetguard brand. The company had pro forma net income of $34.9 million in the first quarter on sales of $418.6 million.

    About 16% of its 2022 sales went to original-equipment manufacturers, where its filters are used for new vehicles and equipment, and about 84% were aftermarket sales.

    The company was created by Cummins, a maker of diesel and natural-gas engines, in 1958.

    The IPO comes in a thin year for deals. There have been just 44 IPOs this year to raise $7.3 billion in proceeds, according to Renaissance Capital, a provider of IPO exchange-traded funds and institutional research.

    That’s up 29.4% from the same period in 2022, when deal flow slowed to its lightest in decades.

    “Deal flow started at a decent pace but failed to pick back up after the February lull, as hawkish signals from the Fed, renewed recession fears, and turmoil within the banking industry caused a spike in volatility,” Renaissance wrote in April commentary.

    The biggest deal of the year to date was that of Kenvue Inc.
    KVUE,
    -0.11%    ,
    a spinoff from Johnson & Johnson
    JNJ,
    +0.14%    ,
    which is parent to a number of household brands, including Tylenol, Band-Aid, Listerine and Benadryl.

    For more, see: Kenvue stock cheered in Wall Street debut, as Tylenol and Band-Aid brand parent is valued at $48 billion

    Kenvue raised $3.8 billion after pricing above range and achieving a valuation of $41 billion.

    The Renaissance IPO ETF
    IPO,
    +2.06%
    has gained 18% in the year to date, while the S&P 500
    SPX,
    +1.34%
    has gained 9%.

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  • Durable-goods orders get a boost from military spending

    Durable-goods orders get a boost from military spending

    The numbers: Orders for manufactured goods jumped 1.1% in April largely because of the military, but business investment also rose sharply in a positive sign for the economy.

    Economists polled by the Wall Street Journal had forecast a 0.8% decline. Durable goods are items meant to last a long time.

    Yet orders fell 0.2% if transportation is excluded, the government said Friday. The transportation segment is a large and volatile category that often exaggerates the ups and downs in industrial production.

    The pace of orders has slowed sharply over the past year and is now just slightly positive. Orders rise in an expanding economy and shrink in a contracting one.

    In a good sign, business investment rose a sharp 1.4% after a string of weak readings. Companies invest more when they expect the economy to improve, but it remains to be seen if it’s the blip or the start of a trend.

    Big picture: The industrial side of the economy has largely been sidelined by rising interest rates and a shift in consumer spending away from manufactured goods.

    What has kept the economy afloat is an increase in spending on services such as travel, recreation and hospitality.

    The divide in the economy is likely to persist for while and leave the U.S. more susceptible to a recession.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    -0.11%
    and S&P 500
    SPX,
    +0.88%
    were set to open mildly higher in Friday trades.

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  • Deere’s stock powers up after big profit and sales beats, raised full-year outlook

    Deere’s stock powers up after big profit and sales beats, raised full-year outlook

    Shares of Deere & Co. powered higher Friday after the maker of agricultural, construction and forestry equipment reported fiscal second-quarter results that beat expectations by wide margins and raised its net income outlook, citing “healthy demand” for farm and construction equipment.

    Net income for the quarter to April 30 rose to $2.86 billion, or $9.65 a share, from $2.10 billion, or $6.81 a share, in the same period a year ago. That was well above the FactSet consensus for earnings per share of $8.58.

    Sales grew 30% to $17.39 billion, to beat the FactSet consensus of $14.89 billion, as production and precision agriculture sales jumped 53%, small agriculture and turf sales increased 16% and construction and forestry sales rose 23%.

    The stock
    DE,
    -1.88%
    rallied 3.9% in premarket trading, enough to make it the S&P 500 index’s
    SPX,
    -0.14%
    biggest gainer ahead of the open.

    Among Deere’s business segments:

    • Production & Precision Agriculture sales jumped 52.9% to $7.82 billion, above the FactSet consensus of $7.29 billion. Operating profit more than doubled, rising 105.3% to $2.17 billion, as operating margin improved by 7.0 percentage points to 27.7%.

    • Small Agriculture & Turf sales increased 16.1% to $4.15 billion to beat expectations of $3.74 billion. Operating profit rose 63.3% to $849 million, as operating margin improved 5.9 percentage points to 20.5%.

    • Construction & Forestry sales grew 22.9% to $4.11 billion, topping expectations of $3.88 billion. Operating profit edged up 2.9% while operating margin contracted by 3.9 percentage points to 20.4%.

    “As shown by the company’s outstanding second-quarter results, Deere continues to benefit from favorable market conditions and an improving operating environment,” said Chief Executive Officer John May.

    The company raised its full-year guidance range for net income to $9.25 billion to $9.50 billion from $8.75 billion to $9.25 billion.

    For its business segments, the company affirmed its fiscal 2023 sales growth outlook for Production & Precision Agriculture of up about 20%, lifted its outlook for Small Agriculture & Turf to up about 5% from flat to up 5% and revised higher its guidance for Construction & Forestry to up about 15% from up 10% to 15%.

    The stock has dropped 13.6% year to date through Thursday, while the Industrial Select Sector SPDR exchange-traded fund
    XLI,
    -0.24%
    has tacked on 1.8% and the S&P 500 has gained 9.3%.

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  • Chicago business activity index less negative in April

    Chicago business activity index less negative in April

    The Chicago Business Barometer, also known as the Chicago PMI, rose 4.8 index points to 48.6 in April.

    Economists polled by the Wall Street Journal forecast a decline to a 43.8 reading. 

    This is the eighth straight reading below the 50 threshold that indicates contraction territory.

    The index is produced by the ISM-Chicago with MNI. It is released to subscribers three minutes before its release to the public at 9:45 am Eastern. It is the last of the regional manufacturing indices before the national ISM data for April is released on Monday.

    So far, the regional data suggest a modest improvement this month in the manufacturing ISM. In March, the ISM factory index fell to 46.3% from 47.7% in the prior month. It was the fourth month in contraction territory.

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