uploads///SPDR May

With US Market Sentiment High, Why Did Manufacturing PMI Fall?

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US markets trade higher despite fall in crude oil

US Markets were trading on a higher note on May 2, 2016, buoyed by a rise in consumer discretionary and financial stocks. They were trading higher despite weaker manufacturing activity and a fall in the value of the US dollar index.

Crude oil prices were also defying the weakness in the dollar, trading lower by more than 2% during the day. There has been continued weakness in the US dollar since last week. It came on the back of weak corporate earnings and low expectations of a rate hike from the US Federal Reserve.

On May 2 at 1:30 PM EST, the S&P 500 VIX Index fell 4.1%. The S&P 500 Futures Index and the Dow Jones Industrial Average rose 0.61% and 0.53%, respectively. NASDAQ futures were also trading stronger and increased by 0.51%.

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Manufacturing PMI falls to 50.8

The manufacturing PMI (Purchasing Managers’ Index) published by the Institute for Supply Management fell in April to 50.8. That compares to 51.8 in March and expectations of 51.4. A fall in production levels and new orders contributed to the fall in the manufacturing PMI, which released above the threshold level of 50, signaling expansion in the sector. 

On the other hand, construction spending increased by 0.3% on a monthly basis in March against an increase of 1% in February. Even though construction spending recorded an increase for the fourth consecutive month, it was the lowest reading since November.

Impact on ETFs across sector SPDR indexes

The consumer discretionary and financial sectors traded positively on May 2. The Consumer Discretionary Select Sector SPDR ETF (XLY) was the outperformer for the day. It rose 1.2% at 1:30 PM EST. The Financial Select Sector SPDR ETF (XLF) rose 0.90%. The Utilities Select Sector SPDR ETF (XLU) rose 1.2% during the day.

Among the major sector-specific SPDRs trading negatively, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) fell 1.2%. The Energy Select Sector SPDR ETF (XLE) and the SPDR Gold Shares ETF (GLD) fell 0.26% and 0.13%, respectively, on May 2 at 1:30 PM EST.

In the next part of this series, we’ll see why the Brazilian real fell.

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