Stock markets opened sharply lower on Monday morning with all three major indexes more than 2% lower in the early minutes of trading. Losses could have been even worse but equity futures moderated somewhat before the bell, following an upside surprise in the New York Fed’s manufacturing survey.
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers are at their most optimistic level since November 2007. The headline Business Conditions index expanded by 13 points to a +12 reading in August, with New Orders jumping almost 8 points to +13.4, and Shipments advancing 3 points to +14.1.
“Employment indexes were much improved from their recent low levels, although they remained below zero,” the report said. The index tracking employee payrolls moved up to -7.5 from -21.8, while the average employee workweek climbed to -6.4 from -19.8.
Analysts from RDQ said the data was consistent with “the recession having ended in the second quarter,” though they add that inventory liquidation “continues to be a significant drag on output gains.”
Indexes looking ahead by six months also conveyed optimism as the future business conditions component hit a two-year high, with the capital expenditures index rising to its highest level in over a year.
“This report corroborates the improvement in the industrial production figures for July, which were reported on Friday; and it suggests that the national production figures
will rise further in August,” said chief US economist Joseph LaVorgna from Deutsche Bank. “This is significant, because industrial production is an important gauge in determining recession starting and end points.”