Summary

The 0.9% pop in industrial production is partly due to a rebound in aircraft production and overstates the current state of the sector. In reality, 2024 was a boring year for manufacturing as high rates and uncertainty hit demand for capex. There's some optimism in the air for 2025.

Manufacturing constrained, but some signs of optimism

Industrial activity popped to end what was a pretty lackluster year for the sector. Overall production jumped 0.9% in December which marked the fastest monthly gain since February, but that leaves the index up just a half a percent compared to where it stood a year ago.

Production received a lift by all major components in December. Mining output rose 1.8% and utilities production jumped 2.1% on stronger natural gas production. Much of the overall gain can be traced to the largest component, manufacturing output, which rose 0.6% in December on the heels of upwardly revised data for November.

While there were some decent industry gains under the surface, a majority of the strength can be tied to a 6.3% gain in civilian aircraft production reflecting the end to a strike at Boeing. The reality is 2024 was a boring year for manufacturing. The overall manufacturing index finished the year at 99.3, which is precisely where it ended 2023 (chart).

Chart

There have been some pockets of strength that have bucked the dull trend, namely in high-tech industries like computer & electronic products and electrical equipment & appliances (chart). A notable offset to broad-based weakness also came from the large chemical industry where production was up 5.4% over the past year.

fxsoriginal

But most industries experienced flat-to-down growth in 2024 with capex demand sapped by less liquidity, high interest rates and most notably continued uncertainty. Although aircraft has pulled down broad business equipment output in recent months, the divergence between business and consumer goods output seen in the nearby chart speaks to current conditions where business investment has flagged despite continued consumer resilience.

fxsoriginal

Small business sentiment has shifted in the wake of the election amid optimism around deregulation and tax policy generally, but tariffs remain a big asterisk to the outlook. It remains to be seen which tariff policies come to pass and the lack of clarity keeps many businesses in a wait-and-see mode in approaching new capex. This is the sense we're getting from not only the hard data but also from recent ISM manufacturing surveys and from our client discussions, but it remains to be seen to what extent demand conditions pick up this year.

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A real-time quote for a fast moving stock may be more indicative of what has already occurred in the market rather than the price you will receive. Your Execution Price and Orders Ahead In a fast market, orders are submitted to market makers and specialists at such a rapid pace, that a backlog builds up which can create significant delays. Market makers may execute orders manually or reduce size guarantees during periods of volatility. When you place a market order, your order is executed on a first-come first-serve basis. This means if there are orders ahead of yours, those orders will be executed first. The execution of orders ahead of yours can significantly affect your execution price. Your submitted market order cannot be changed or cancelled once the stock begins trading. Initial Public Offerings may be Volatile IPOs for some internet, e-commerce and high tech issues may be particularly volatile as they begin to trade in the secondary market. 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For example, you place an order to sell stock you own at a stop limit of $67. If the stock drops to $67 or less, the trade becomes a limit order and your trade will only be executed at $67 or better. Glossary All or None (AON) A stipulation of a buy or sell order which instructs the broker to either fill the whole order or don't fill it at all; but in the latter case, don't cancel it, as the broker would if the order were filled or killed. Day Order A buy or sell order that automatically expires if it is not executed during that trading session. Fill or Kill An order placed that must immediately be filled in its entirety or, if this is not possible, totally canceled. Good Til Canceled (GTC) An order to buy or sell which remains in effect until it is either executed or canceled (WellsTrade® accounts have set a limit of 60 days, after which we will automatically cancel the order). Immediate or Cancel An order condition that requires all or part of an order to be executed immediately. The part of the order that cannot be executed immediately is canceled. Limit Order An order to buy or sell a stated quantity of a security at a specified price or at a better price (higher for sales or lower for purchases). Maintenance Call A call from a broker demanding the deposit of cash or marginable securities to satisfy Regulation T requirements and/or the House Maintenance Requirement. This may happen when the customer's margin account balance falls below the minimum requirements due to market fluctuations or other activity. Margin Requirement Minimum amount that a client must deposit in the form of cash or eligible securities in a margin account as spelled out in Regulation T of the Federal Reserve Board. Reg. T requires a minimum of $2,000 or 50% of the purchase price of eligible securities bought on margin or 50% of the proceeds of short sales. Market Makers NASD member firms that buy and sell NASDAQ securities, at prices they display in NASDAQ, for their own account. There are currently over 500 firms that act as NASDAQ Market Makers. One of the major differences between the NASDAQ Stock Market and other major markets in the U.S. is NASDAQ's structure of competing Market Makers. Each Market Maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the Market Maker will immediately purchase for or sell from its own inventory, or seek the other side of the trade until it is executed, often in a matter of seconds. Market Order An order to buy or sell a stated amount of a security at the best price available at the time the order is received in the trading marketplace. Specialists Specialist firms are those securities firms which hold seats on national securities exchanges and are charged with maintaining orderly markets in the securities in which they have exclusive franchises. They buy securities from investors who want to sell and sell when investors want to buy. Stop An order that becomes a market order once the security has traded through the designated stop price. Buy stops are entered above the current ask price. If the price moves to or above the stop price, the order becomes a market order and will be executed at the current market price. This price may be higher or lower than the stop price. Sell stops are entered below the current market price. If the price moves to or below the stop price, the order becomes a market order and will be executed at the current market price. Stop Limit An order that becomes a limit order once the security trades at the designated stop price. A stop limit order instructs a broker to buy or sell at a specific price or better, but only after a given stop price has been reached or passed. It is a combination of a stop order and a limit order. These articles are for information and education purposes only. You will need to evaluate the merits and risks associated with relying on any information provided. 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