After an exuberant week in which investors celebrated a new round of stimulus from the Federal Reserve, industrials drifted lower on Monday. Manufacturing underperformed the Dow Jones Industrial Average, itself down 0.3%, as news from the New York Federal Reserve Bank indicated that industrial output has remained weak.

The Empire State Manufacturing Survey, conducted quarterly by the New York Fed, gathers input from manufacturers in New York state on general business conditions, employment and sales figures, and confidence. It is the first such regional data to be reported, and Monday's gloomy results show that manufacturing remains weaker than last week's stock market rally would indicate.

The survey data led to broad declines, most dramatically at North American Palladium (NYSE: PAL), where share prices fell more than 8%. Palladium prices are tightly linked to industrial output and demand, as the metal is used primarily in catalytic converters, required parts in engines for cars, trucks, mining equipment, and construction equipment. Similarly, Vulcan Materials (NYSE: VMC), which produces construction inputs such as crushed stone, gravel, asphalt, concrete, and cement, saw shares drop 6%, reflecting general skepticism over the strength of industrial output.

The day's biggest winner in the manufacturing sector was Tesla Motors (Nasdaq: TSLA), up more than 7%. The ultra-luxury electric-car maker has recently ramped up production to 100 vehicles per week. This is ahead of schedule, but it remains far short of CEO Elon Musk's goal of more than 400 vehicles per week by 2013. On Monday, analysts at Morgan Stanley wrote that "we think fears over a slower ramp are overdone" and upgraded the company's price target for shares of Tesla from $45 to $50. Shares currently trade around $32, representing more than 50% upside to Morgan Stanley's estimate.

Gun stocks on target
Two other noticeable exceptions to the day's broad declines were gun manufacturers Smith & Wesson (Nasdaq: SWHC) and Sturm, Ruger (NYSE: RGR), each up more than 3% in Monday's trading. This is nothing new for the firearms industry: The two companies have racked up impressive gains since the presidential campaign began in earnest, with Smith & Wesson up 65% and Sturm, Ruger up 40% since June.

Smith & Wesson CEO James Debney claimed in June that presidential politics were driving company returns. Independent analysts have noted that an Obama re-election could lead to higher gun sales, as firearm enthusiasts fear that the Democrat could enact new restrictions on gun ownership. On the other hand, though President Obama has so far made no moves to limit gun rights, the realization of such fears could lead to a tougher regulator environment for firearm manufacturers.

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