Reuters Insider - Inside the News: U.S. ISM Prices Paid Figure Raises Concerns

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13/06/2016 10:59

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 Source:             Thomson Reuters                                   
                                                                       
 Description:        Following the release of the U.S. ISM report,     
                     Reuters Economics Correspondent Emily Kaiser says 
                     a rise in commodity prices across the board is    
                     putting pressure on manufacturer margins.         
 
 
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Transcript (May be auto-generated)

                 Time to go Inside the News at 11AM. US stocks are surging on the back of strong 
data. Add to the mix your typical January effect and you've got yourself a 
rally. We're up triple digits on the Dow, the NASDAQ 100 is at a 10-year high 
and the S&P 500 is up more than 1%. If we end there, it could be bullish for the
year according to Schaeffer's Investment Research when the S&P 500 has gained 
more than 1% on the first day of trading. In the New Year, the index has ended 
the year higher 86% of the time. Meanwhile, you probably don't need me to tell 
you, bonds are down. Steady at lower levels hit this morning, the Dollar 
trimming its gains against the Yen and the Euro. The latest report on US 
manufacturing shows the sector continues to grow. The December ISM number came 
in at 57, that was matching expectations but there are some areas of concern 
beneath the surface. 

Reuters Economics Correspondent Emily Kaiser joins us from Washington. So Emily,
the prices paid figure caught your attention. Why and why is that a big deal? 
Well, what we're seeing right now is commodity prices filtering into what it 
cost a company to manufacture whatever it is they're making. We know oil is up, 
we know a host of other commodities are up. And right now, it's really a margin 
problem for them. These companies can't really raise prices all that much into a
still kind of weak economy. So they're gonna have to eat that higher cost. Now, 
I'm normally a macro person but I do have to bring one micro issue in. We had a 
chance to talk to Norbert Ore who's the chair of the ISM Committee and he 
pointed out that the one commodity in short supply is cocoa powder. Now, for the
broader economy, not a huge deal. For me personally, I need my chocolate so I'm 
watching that one kind of closely. Yeah Emily, that would be a big deal if they 
try and pass that price under me. Alright, Emily Kaiser, thanks a lot. 

Bank of America announced it would pay $2.8 billion to Fannie Mae and Freddie 
Mac to resolve issues with mortgages sold to them by Countrywide Financial 
before BofA bought the lender. Paul Miller of FBR Capital Markets says the 
announced settlement amount came in far below the multi-billion Dollar figures 
that investors had feared. It's nowhere near the doomsday scenario, and so that 
takes a big overhang away from the stock and I think the stock has a long way to
go before it's done. In other words, it can go as high as $17, $18. 

A source tells Reuters sales of cars and light trucks hit a record in Brazil in 
2010. They jumped nearly 11% for the year and reached their highest monthly 
total ever in December. Separately, a survey of commercial real estate investors
out today shows Brazil is viewed as the top emerging market for investment in 
2011. All of this on the first business day for the new administration headed by
Brazil's first female President. Reuters Brazil Chief Correspondent Brian Winter
will have more on the new government in our next update at the top of the hour. 

In today's Hot Stocks, Clorox is trading at more than twice its average daily 
volume over the past six weeks. Right now, shares are down more than 3%. The 
consumer products company said it expects sales to fall 3%-4% in its fiscal 
second quarter. And shares of Inspire Pharmaceuticals are changing hands at 20 
times their average daily volume over the past 30 days. They are down nearly 
60%. The company said its experimental treatment for cystic fibrosis did not 
show signs of significant benefit to patients in a late stage study. Stick 
around, how did Facebook get that $50 billion valuation and more on the social 
networking giant's big fund raiser. That's coming up at 12:30PM with Rob Cox. 
Our next update is at noon. I'm Jen Rogers. This is Reuters Insider