Briefs for Friday
WASHINGTON – U.S. factory output slid last month as a shortage of computer chips disrupted auto production.
Manufacturing production dipped 0.1% in June – third drop in five months, the Federal Reserve reported Thursday.
Overall, industrial production – including output at factories, mines and utilities – rose 0.4% last month after increasing 0.7% in May. Industrial output is up 9.8% from a year earlier.
The chip shortage pushed production of cars, trucks and auto parts down 6.6% in June. Excluding autos, industrial production rose 0.4% last month.
“The manufacturing sector continues to be hobbled by supply constraints,’’ said Stephen Stanley, chief economist at Amherst Pierpont Securities. “The highest profile example is the struggle by automakers to manage through a chip shortage.’’
Utility output climbed 2.7% in June as Americans cranked up the air conditioning to battle a heat wave across much of the country.
Mining output rose 1.4% on an uptick in oil and gas production.
American industry has been bustling as the coronavirus threat recedes, despite a shortage of workers and trouble getting supplies in time.
The Institute for Supply Management, an association of purchasing managers, reported that its manufacturing ticked slightly lower last month compared to May.
But it still came in at 60.6 on a scale where anything above 50 signals growth.
Still, factory hiring shrank, ISM found, largely because manufacturers are struggling to fill job openings as the economy rebounds with unexpected speed from the coronavirus recession.
Stocks finish mostly lower
Major U.S. stock indexes closed mostly lower Thursday, pulling back further from the record highs they reached at the start of the week.
The S&P 500 fell 0.3% after shedding an early gain. The benchmark index is now on pace for its first weekly loss in four weeks.
Technology and communications stocks, and companies that rely on consumer spending, accounted for much of the pullback, outweighing gains elsewhere in the market.
Energy stocks fell following a slide in energy prices. Among winners were financial stocks, including banks, which have been reporting mostly solid earnings.
Bond yields fell. The yield on the 10-year Treasury note slipped to 1.30% from 1.35% the day before.
Investors continued to focus on where the economy is headed as the pandemic wanes and on what companies have to say about how higher inflation is affecting their business.
“As long as inflation ends up being transitory, as the Fed believes, the economy is set to continue to do real well,” said Chris Gaffney, president of TIAA Bank World Markets.
From wire reports“The big risk is that inflation spikes and stays here.”
The S&P 500 fell 14.27 points to 4,360.03. The tech-heavy Nasdaq slid 101.82 points, or 0.7%, to 14,543.13.
The Dow Jones Industrial Average bucked the trend and bounced back after being down much of the day. The blue-chip index gained 53.79 points, or 0.2%, to 34,987.02.
Small company stocks also fell. The Russell 2000 index lost 12.07 points, or 0.6%, to 2,190.29.
On Thursday, Federal Reserve Chair Jerome Powell delivered his second day of testimony before Congress.
Powell reiterated that signs of inflation should ease or reverse over time, while acknowledging that the U.S. is in the midst of an unparalleled economic reopening on the heels of a pandemic-induced recession.
The government said Wednesday that inflation at the wholesale level jumped 1% in June, pushing price gains over the past 12 months up by a record 7.3%.
That followed a report a day earlier showing consumer prices posted the biggest 12-month gain in 13 years.
Investors are also trying to determine how the economic recovery will play out for the rest of the year as the world tries to get back to normal with COVID-19 waning, but still lingering.