Another Milestone for the Dow

Another Milestone for the Dow

It’s official: The Dow Jones Industrial Average has hit its highest level in four years—13,338 points. And today’s rally can be chalked up to surprisingly good news on the manufacturing front.

To start, the Chinese government announced that the country’s manufacturing sector continued to improve for the fifth consecutive month. Specifically, the manufacturing index climbed from 53.1 in March to 53.3 in April. To provide some context, a reading of 50 or higher signals expansion. In China, manufacturing is critical to economic growth, so this news helped to dispel fears of a hard-landing scenario for the world’s most populous country.

The United States also enjoyed better-than-expected manufacturing growth in April. The ISM Manufacturing Index jumped from 53.4 in March to 54.8 in April. This trumped the consensus estimate, which called for a drop to 53. As in the case with China’s index, a reading above 50 indicates growth. In particular, factories reported the highest level of new orders in over a year; this above all else boosted the headline figure. This report was a pleasant surprise because U.S. durable goods orders did lose ground in May, as did Chicago’s Purchasing Manager’s Index, which measures the economic health of manufacturing in the region.

So, while I’m still focused primarily on earnings, I always welcome strong economic news from two of the world’s largest economies. If earnings announcements continue to trump analyst estimates and economic reports continue to surprise economists, I expect that the Dow will have no trouble reaching the 14,200 benchmark I set for it at the beginning of this year.

Sincerely,

Louis Navellier

Louis Navellier

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