The Dow Jones Industrial Average (^DJI +1.39%) is up after a positive report on manufacturing activity in the U.S. As of 1:15 p.m. EDT, the Dow was up 25 points to 14,999. The S&P 500 (^GSPC +0.57%) was up 6 points to 1,620.
There were two U.S. economic releases today.
|
Report |
Period |
Result |
Previous |
|---|---|---|---|
|
CoreLogic home prices |
May |
12% |
11% |
|
Factory orders |
May |
2.1% |
1.3% |
The one to pay attention is factory orders. It's well known that home prices were up in May; the big question is whether they will continue their rise now that mortgage rates have jumped. The Department of Commerce reported factory orders rose 2.1% in May, slightly above analyst expectations of 1.9% growth and above April's 1.3% growth. Excluding transportation, new orders were up just 0.6%. Durable goods orders were up 3.7% while nondurable goods were up 0.7%. The durable goods growth is an especially good sign of a resurgent economy as it shows that consumers and businesses are investing in appliances, cars, and other purchases that could be put off if the economy were doing poorly.
The one big question on the market's mind is "is the unemployment situation improving?" We will find out more when ADP releases its private sector jobs report tomorrow and when the Department of Labor releases the nonfarm payrolls report Friday. The market is currently being sustained by the Federal Reserve's purchasing of $85 billion worth of long-term assets each month, which the Fed has said will continue until inflation picks up or the jobs market improves to 6.5%-7% unemployment. If the jobs report comes in better than expected, the market may drop as that would mean that the Fed will taper sooner than expected.
One company that won't mind higher rates is today's Dow leader, JPMorgan Chase (JPM +1.25%), which is up 2.01% to $53.16. The bank is up today after being upgraded by Raymond James from "outperform" to "strong buy" with a target price of $64, as the analyst expects the bank's earnings to be better than they previously expected. We will get some idea of how the bank is doing after it reports second-quarter earnings next Friday. While the bank has faced some short-term challenges and now faces another with the rise in interest rates, these will all be nothing more than short-term headwinds for the bank. In the medium term, higher rates are better for banks as they can lend out their deposits and make a higher return on those deposits.
