Market Overview

Stocks Rally as U.S. Industrial Production Posts Largest Increase in a Year

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The Federal Reserve reported on Monday that U.S. November industrial production increased by 1.1 percent. That was the largest percentage gain since November 2012, when production rose by 1.3 percent.

The figure came in above analyst expectations of 0.5 percent, and surpassed its pre-recession peak level of December 2007.

The October industrial production number was revised higher to a 0.1% gain from an initially reported decline of 0.1%.

Manufacturing output increased 0.6 percent in November, marking its fourth consecutive monthly gain, while production at mines rose 1.7 percent. The index for utilities increased by 3.9 percent in November, impacted by higher demand for heating due to colder-than-average temperatures.

Industrial capacity utilization, a gauge of the extent firms are using their resources, increased 0.8 percent in November to 79.0, reflecting less slack at factories. However, the rate remains 1.2 percent below its long-term average from 1972-2012.

Market Reaction

Stocks advanced as the strong figures from November reflected renewed momentum in U.S. manufacturing. The U.S. dollar index also traded higher in the wake of the news.

Other recent U.S. economic reports, including employment and retail sales, have also been positive. Last month, the unemployment rate fell to its lowest level in five years while retail sales posted substantial gains.

FOMC Meeting

Fed officials meet this week, and on Wednesday are expected to announce their plans on whether they will begin to rein-in their $85 billion-a-month bond-buying program.

While analysts remain divided on the matter, the recent positive economic news is likely to increase the possibility that the Fed will announce the start of tapering in the near future.

Last week, in a speech to the CFA Society of St. Louis, Federal Reserve Bank of St. Louis President James Bullard said a small taper "might recognize labor-market improvement while still providing the committee the opportunity to carefully monitor inflation during the first half of 2014.” On that same day, the more hawkish Dallas Fed President Richard Fisher said in a speech in Chicago, “We at the Fed should begin tapering back our bond purchases at the earliest opportunity.”

CME E-Mini S&P 500 Futures Daily Chart

 

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Posted-In: industrial production James Bullard production Richard FisherNews Economics Federal Reserve Media Best of Benzinga

 

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