The Manufacturing Sector Is Shrinking, According To Institute for Supply Management

Still, the manufacturing industry, which has traditionally been a driving force for the U.S. economy, is still contracting and there is some hope that there is still more to come. But, initially, it is still a positive sign for manufacturing stocks.

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It is a level of 46.3, which is lower than the 46.35 reading economists were expecting. The Institute for Supply Management's March manufacturing index, or PMI, comes in below the 47.7 reading that was recorded in February. Generally speaking, a reading above 50 indicates growth. This reading, which was released on Monday, shows the U.S. manufacturing sector is contracting at an accelerated pace.

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It was reported that the index for new orders posted a number of 44.3, which was down from 47 reported in February. Although a number below the overall index isn't great, the new orders index posted a number of 42.5 in January. Things have been weak for a while. The index for new orders has been below 50 for the last seven months.

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There is no doubt that investor sentiment is weak at this point. Particularly, a slowdown in manufacturing demonstrated that the Federal Reserve's policy of hiking interest rates has been working, and this means that it is likely to raise rates less frequently in the future.

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There were gains of 0.5% in the Industrial Select Sector SPDR ETF (ticker: XLI) as of 1 p.m. EDT, while gains of 0.4% and 1% were registered in the S&P 500 and Dow Jones Industrial Average, respectively.

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During the week, the stock prices of Caterpillar (CAT) and General Electric (GE), two of the most important industrial companies in the U.S., are up 1.6% and 1.1%, respectively.

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Companies will report first-quarter numbers in a few weeks, so investors will have another opportunity to hear about demand and orders.

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