New orders for U.S.-made goods increased for a second straight month in January, suggesting the recovery of the manufacturing sector was gaining momentum as rising prices for commodities spur demand for machinery. Factory goods orders rose 1.2 percent, the Commerce Department said on Monday after an unrevised 1.3 percent jump in December. Economists polled by Reuters had forecast factory orders advancing 1.0 percent in January. Factory orders were up 5.5 percent from a year ago. Total shipments of manufactured goods increased 0.2 percent after surging 2.5 percent in December. Manufacturing, which accounts for about 12 percent of the U.S. economy, is regaining its footing after being buffeted by lower oil prices, a strong dollar and an inventory overhang. The nascent recovery was underscored by a survey last week showing a gauge of national factory activity jumped to a 2-1/2-year high in February.
Manufacturing could be boosted by the Trump administration's proposed tax reform, which would include corporate tax cuts. Promises of a lower corporate tax bill have buoyed business confidence in the last few months, but are yet to translate into strong business investment on capital goods. The Commerce Department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - slipped 0.1 percent in January instead of the 0.4 percent drop reported last month. Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, fell 0.4 percent in January. They were previously reported to have declined 0.6 percent.
The weakness in shipments points to continued sluggish growth in business spending on equipment, which increased at a 1.9 percent annualized rate in the fourth quarter. That was the first rise in over a year. U.S. stocks and the dollar . DXY were trading lower in mid-morning trading. Prices of U.S. Treasuries also fell. In January, orders for transportation equipment accelerated 6.2 percent, reflecting a 62.2 percent surge in defense aircraft orders. There was also a 69.8 percent jump in orders for civilian aircraft. Outside transportation, orders for machinery increased 0.9 percent.
Orders for computers and electronic products fell 1.9 percent and bookings for electrical equipment, appliances and components declined 2.6 percent. Orders for fabricated metal product rose 2.3 percent. Unfilled orders at factories fell 0.4 percent after declining 0.8 percent in December. Unfilled core capital goods orders increased 0.4 percent in January after a similar gain in the prior month. Inventories of goods at factories rose 0.2 percent in January. They have increased in six of the last seven months. The inventories-to-shipments ratio was 1.31 in January, unchanged from December.
Billionaire Warren Buffett, whose stock picks over several decades have turned Berkshire Hathaway Inc (BRKa. N) into one of the most successful conglomerates, delivered another black eye to the investment industry on Saturday, saying investors should "stick with low-cost index funds.""When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients," Buffett, widely considered one of the world's best investors, said in his annual letter to shareholders."Both large and small investors should stick with low-cost index funds."Buffett, whose annual letter is scrutinized by investors who consider him "the Oracle of Omaha," estimated that the search for outperformance has caused investors to "waste" more than $100 billion over the past decade. On Saturday, he called Vanguard Group founder Jack Bogle "a hero" for his early efforts to popularize index funds. His own Berkshire Hathaway gained 20.8 percent per year from 1965 to 2016, compared to the S&P 500's 9.7 percent gain, the company said. Yet Buffett has often said he believes most stock investors are better off with low-cost index funds than paying higher fees to managers who often underperform. In 2014, Buffett said he plans to put 90 percent of the money he leaves his wife when he dies into an S&P 500 index fund and 10 percent in government bonds. During the financial crisis, Buffett bet a founder of the asset management company Protege Partners LLC $1 million that a Vanguard S&P 500 stock index fund would outperform several groups of hedge funds of over the 10 years through 2017. The index fund is up 85.4 percent, Buffett said, while the hedge fund groups are up between 2.9 percent and 62.8 percent.
On Saturday, Buffett said the figures leave "no doubt" that he will win the bet. He plans to donate the money to Girls Inc of Omaha, a charity. It looks like some investors are following Buffett's advice. Despite a roaring stock market in the United States, actively managed mutual funds bled $342 billion last year, their second straight year of losses. Passive index funds and exchange-traded funds attracted nearly $506 billion. But Tim Armour, CEO of Capital Group Cos Inc, said index funds can expose investors to losses when markets turn sour. Capital, the active manager behind American Funds, is a top shareholder in Berkshire and oversees $1.4 trillion altogether."It's important to say that we don't dispute the data that has led Mr. Buffett and others to form their views," Armour said in a statement."However, a fairly simple fact has gotten lost in the debate. Simply put, not all investment managers are average."
LITTLE TO SAY ON TRUMP, SUCCESSION Buffett's Berkshire Hathaway Inc on Saturday said its fourth-quarter profit rose 15 percent from a year earlier, as gains from investments and derivatives offset lower profit from the Burlington Northern Santa Fe LLC [BNI. UL] (BNSF) railroad and other operating units. Buffett has run Berkshire since 1965. The company also owns dozens of stocks including Apple Inc (AAPL. O), Coca-Cola Co (KO. N), Wells Fargo & Co (WFC. N) and the four biggest U.S. airlines, and more than one-fourth of Kraft Heinz Co (KHC. O). This year's letter and annual report gave no clues about who will succeed the 86-year-old Buffett, a question that shareholders and Wall Street have speculated about increasingly in recent years.
But Buffett lavishly praised Berkshire executive Ajit Jain, widely considered a candidate to succeed Buffett as chief executive, for smoothly running much of the conglomerate's insurance businesses. Jain joined Berkshire in 1986, and Buffett immediately put him in charge of National Indemnity's small, struggling reinsurance operation. Jain has since "created tens of billions of value for Berkshire shareholders. If there were ever to be another Ajit and you could swap me for him, don't hesitate. Make the trade!"Berkshire, which became one of the top 10 Apple Inc.