IMAGE 1 (top): Stock Indices from Oct. 1, 2021 to Sept. 30, 2022. Local currency converted to USD using historical spot rates. The JKC Pump and Valve Stock Indices include a select list of publicly traded companies involved in the pump & valve industries, weighted by market capitalization. Source: Capital IQ and JKC research.
The Jordan Knauff & Company (JKC) Valve Stock Index was down 22.3% over the last 12 months, and the broader S&P 500 index was down 17.7%. The JKC pump stock index fell 26.3% for the same time period.1
The Institute for Supply Management’s Purchasing Managers Index (PMI) fell to 50.9%, a figure that is still in expansion territory, but marks the slowest pace of growth in the pandemic.
The New Orders Index, which fell 4.2 percentage points to 47.1%, has been wavering between expansion and contraction over the past four months and points to slower growth ahead. The Prices Index has fallen in recent months to 51.7% in September from a reading of over 80% four months ago.
Source: U.S. Energy Information Administration and Baker
Hughes Inc.
Some prices may still be growing, but many categories are lower. At 50.6%, the Production Index remained relatively the same. The Employment Index dropped 5.5 percentage points to 48.7%, falling back into contraction territory.
New orders for durable goods came in slightly better than expected in August, declining just 0.2%. While the manufacturing sector still looks to be losing momentum, activity is not falling off a cliff.
The United States Energy Information Association forecasts record U.S. natural gas consumption this year. It is expected that natural gas consumption will increase in all end-use sectors, with the electric power sector growing by 4% in 2022. The electric power sector uses more natural gas than any other end-use sector. Despite a large increase in natural gas prices this year, natural gas consumption in the electric power sector increased 7% in the first eight months of 2022, compared with the first eight months of 2021.
U.S. natural gas producers are operating more drilling rigs now than at the beginning of the COVID-19 pandemic. Before the pandemic, the number of operating rigs in the U.S. had generally been declining. The number of natural gas-directed rigs continued to fall in the first half of 2020, reaching a low of 68 rigs on July 24, the fewest in Baker Hughes’s historical data dating back to 1987. Since then, the natural gas rig count has generally been increasing, returning to pre-pandemic levels in January 2022.
Source: Institute for Supply Management Manufacturing Report
on Business and U.S. Census Bureau
On Wall Street, all three indices posted their second straight monthly losses. The Dow Jones Industrial Average and the S&P 500 Index fell 8.8% and 9.3%, respectively, while the Nasdaq Composite lost 10.5% in September. Inflation numbers came in stronger than expected in August despite the Federal Reserve Bank’s efforts to bring down prices.
This implies that the Federal Reserve Bank could further tighten monetary policy until there are signs of inflation cooling off. On a quarterly basis, the Dow, S&P 500 and Nasdaq fell 6.7%, 5.3% and 4.1%, respectively. This is the first time since 2008 the S&P 500 and the Nasdaq posted three consecutive quarterly losses.
Reference
1 - The S&P Return figures are provided by Capital IQ.