The U.S. economy is slowing quickly and nowhere is it more apparent than the ISM’s manufacturing purchasing managers’ index plunging to 49.7% in June. A reading below 50% shows contraction and this is the first time the number has been below 50% since July 2009. Problems in Europe and a slowdown in the United States and China are the primary culprits for this huge disappointment. Form a stock perspective we’ve avoided most manufacturing companies except we do believe that General Motors (GM) offers a compelling value at these levels. While many stocks have come down in price reflecting the reduced earnings expectations I’d still be careful on the names tied to heavy industry, especially if they are highly dependent on China where I believe demand is going to be less than expected.
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