Coug,
Here's one of the reasons for yesterdays deline
NEW YORK (AP) -- Manufacturing activity slowed in December for the seventh straight month, dropping to its lowest level in almost eight years as global economic problems continued to hinder exports.
On Wall Street, investors initially ignored today's report of a sharper-than-expected cooling of the industrial economy, and stocks began 1999 with sharp gains -- at one point sending the Dow industrials to within 25 points of a new high. But stocks were undercut in afternoon trading by a prediction from a regional Federal Reserve Bank official of slower growth and an admonition about ''unrealistic expectations.''
The Dow Jones industrial average was up as much as 168.64 points at 9,350.07 in the morning before its retreat. It then fell 58.96 points before rebounding again to close at 9,184.27, up just 2.84 points. Broader stock indexes were mixed, but the technology heavy Nasdaq composite index posted another new high in active trading.
Some analysts attributed Wall Street's change in direction to a luncheon speech by Jack Guynn, president of the Federal Reserve Bank of Atlanta, to a community group. He said growth would continue in 1999, but at a slower pace than in recent years and expressed concern that what he called the ''institutionalization of unrealistic expectations'' could hurt the U.S. economy.
The National Association of Purchasing Management reported today its monthly index of business activity fell to 45.1 percent last month -- its lowest level since May 1991. Economists had predicted the index would rise slightly from its November level of 46.8 percent.
Any reading under 50 percent is a sign of contraction in the industrial sector.
The private group's report is compiled from a survey of corporate purchasing executives nationwide. It is widely followed by economists because it is usually the first indicator of how the economy performed in the previous month.
In addition to lingering economic troubles abroad, American manufacturers were hurt by slowing domestic demand, as seen in the largely disappointing Christmas shopping season, said David Resler, chief economist at Nomura Securities International Inc.
''It's got to be a matter of concern for the overall economy,'' Resler said.
But Wall Street was extending gains from an impressive fourth-quarter surge that reversed a summer swoon. The Dow, Standard & Poor's 500-stock list and Nasdaq composite index all ended 1998 with an unprecedented fourth straight year of double-digit gains, helped by falling interest rates and low inflation.
Wall Street also was watching the strong launch of the euro, the single currency for 11 European nations. While the toppling of financial barriers is expected to make Europe a tougher competitor to the United States, it also is expected to make it easier for U.S. companies to do business in Europe and less costly for U.S. traders to invest in European businesses.
The purchasing managers' report gave further support to expectations that the U.S. economy will continue to grow in 1999, but at a slower pace.
''New orders continue (to be) weak as we proceed into 1999 and prompt concerns about the manufacturing sector as we move into the first quarter,'' said Norbert J. Ore, chairman of the NAPM's survey panel.
Exports continued to decline in December, although at a slower pace, as purchasing executives expressed concern about the steel industry in particular, the report said.
Prices dropped at a faster rate, a trend that plagued the manufacturing sector through all of 1998. Production also declined at a faster clip.
With struggling manufacturers being forced to cut jobs to save money, manufacturing employment dropped at a faster rate last month.
Despite the decline in manufacturing, the economy recorded its 92nd consecutive month of growth in December, the report said.
If the economy's expansion continues past this year, it would become the longest in U.S. history. The current period of growth began in March 1991.
AP-NY-01-04-99 1627EST
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