Rising Factory Orders Support Industrials ETF Recovery


With a broad-based increase in orders on American manufactured goods, industrial sector stocks and related exchange traded funds could begin to rebound in the second quarter.

Bookings for durable goods, products meant to last at least three years, rose 2.6% in March, the largest gain since November, reports Shobhana Chandra for Bloomberg.

Observers point to increased business investment and improvement in global markets, which would help support manufacturers like United Technologies Corp. (UTX) and Honeywell International (HON).

“It sets things up very well for the second quarter,” Robert Stein, deputy chief economist at First Trust Portfolios LP, said in the Bloomberg article. “Business investment will be a solid contributor to growth.”

Meanwhile, consumer confidence is also improving, which would in turn boost spending. The Bloomberg Consumer Comfort Index rose to a negative 25.4 in the period ended April 20, the second-strongest level since January 2008. [Aerospace ETFs Soar]

“Rising equity prices, which are sitting near all-time highs, and a slower pace of firings in the economy are bolstering consumer confidence across just about all income and demographic groups,” Joseph Brusuelas, a senior economist at Bloomberg LP, said in the article.

Moreover, observers are beginning to turn more positive on global growth, notably on a the Eurozone recovery.

“We’re feeling pretty good about the economies,” Greg Hayes, chief financial officer of UTC, said in the article. “Europe seems to be coming out of the doldrums and the U.S. is performing about as expected.”

Investors capitalized on the improved manufacturing industry can take a look at industrial sector ETFs. For example, the Industrial Select Sector SPDR (XLI) includes a 5.5% weight in UTX and 4.1% in HON; Vanguard Industrials ETF (VIS) allocates 4.2% to UTX and 2.9% to HON; and iShares Dow Jones US Industrial Sector Index Fund (IYJ) holds UTX 3.9% and HON 2.9%. [Industrial ETFs Again Catching Investors’ Attention]

Industrial Select Sector SPDR


For more information on the industrial sector, visit our industrials category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.