MarketView for November 15

Summary

Friday saw both the Dow Jones Industrial Average and the S&P 500 once again hit new highs, making it the sixth consecutive week of gains, as markets continued to take cues from Federal Reserve Chair nominee Janet Yellen, who told a Senate Committee it was too early to end the central bank's stimulus.

Shares of Exxon Mobil led the Dow higher, rising 2.2 percent to end the day at $95.27 a day after Warren Buffett's Berkshire Hathaway reported a new $3.45 billion stake in the second-largest company by market value, behind only Apple.

Both the S&P and Dow capped a fourth straight day of gains and the S&P 500 finished within two points of 1,800, as investor confidence in the market remained high. Toward the end of the year, fund managers who are trailing their benchmarks may help boost stocks as they chase performance.

A number of big hedge funds disclosed they took positions in ailing department store J.C. Penney, sending its shares up 3.9 percent to $9.03.

FedEx added 1.6 percent to end the day at $138.65 after filings showed Third Point, Soros Fund Management and Paulson & Co the shares to their portfolios.

Shares of Electronic Arts fell 7.3 percent to $24.06 per share. Omega Advisors, owned by billionaire Leon Cooperman, said in a Thursday filing it had dissolved its stake of 750,000 shares in the video game publisher.

InterCloud Systems were up 271 percent to end the day at $9.46 after the cloud computing and consulting services company said its quarterly revenue rose five-fold to $16.2 million.

NY Factory Output Declines

Factory activity declined in New York state earlier this month and employment in the sector failed to grow for the first time since June, signs that U.S. manufacturing may have lost a step.

The New York Fed's "Empire State" index of business conditions at factories fell to minus 2.21 from 1.52 in October, the first negative reading since May. A reading above zero indicates expansion.

The report underscores the headwinds facing the world's largest economy, where the recovery remains fragile.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions. If the weakness in New York also appears in other major manufacturing regions, it would mark a setback after data in October showed relatively robust hiring across the economy and strong expansion at factories.

Labor market conditions in New York's factories weakened, with the index for the number of employees slipping to 0.0 from 3.61 in October. The average employee workweek index also sank to minus 5.26 from 3.61.

Export Prices Fall

The Labor Department reported on Friday that export prices fell 0.5 percent last month, the seventh decline in eight months. The decline suggests that consumers in crisis-stricken Europe and other major trading partners are struggling so much that American producers have little leverage to raise prices.

The Labor Department's report also indicated that prices for U.S. imports fell 0.7 percent in October, which was a more dramatic decline than had been expected.

A 3.6 percent fall in petroleum imports, which was the biggest fall in more than a year, drove the drop in overall prices. However, there were signs that weakness abroad was also fueling price declines.

Prices for imports from Japan dropped 0.2 percent last month, a possible sign that the downward pressure on Japan's currency from its extremely accommodative monetary policy has made its exports more competitive abroad.

In a possible sign of the wind in Japan's sails, prices for auto imports fell 0.1 percent and were down 1.4 percent in the year through October. The 12-month decline is the biggest drop since the Labor Department began tracking it in 1981.

Nationwide Factory Output Rises

Manufacturing output rose for a third straight month in October even as automobile production fell, suggesting a broadening in activity in a sector regaining momentum after a decline earlier this year.

National manufacturing output increased 0.3 percent after edging up 0.1 percent in September, the Federal Reserve said. In the 12 months through October, factory production was up 3.3 percent, the fastest since December 2012. The monthly increase, which matched Street expectations, was despite a 1.3 percent fall in auto production. Auto assembly fell for the first time since July.

Growth in manufacturing was broad-based last month, with hefty increases in the production of primary metals, printing and support, plastics and rubber products, furniture and computer and electronic products, among others.

Industrial Production Down

Despite the rise in manufacturing output, overall industrial production fell 0.1 percent, weighed down by declines at power plants and mines. Weather-sensitive utilities output fell 1.1 percent last month after surging 4.5 percent in September.

Mining production contracted 1.6 percent in October, the first drop in seven months. The Fed attributed the fall to temporary shutdowns of oil and gas rigs in the Gulf of Mexico as Tropical Storm Karen approached.

With industrial production slipping, the amount of capacity in use fell 0.2 percentage point to 78.1 percent. The Fed looks at capacity utilization measures as a signal of how much "slack" remains in the economy, and how much room growth has to run before it becomes inflationary.

Any decline in capacity utilization could stoke fears of disinflation taking hold and make it difficult for the Fed to scale back its massive monthly bond purchasing program.

The lack of inflation pressures was underscored by a third report from the Labor Department showing import prices fell 0.7 percent in October as petroleum prices dropped by the most in nearly 1-1/2 years. Prices excluding petroleum barely rose last month and were down 1.3 percent from a year ago.