May certainly ended on a confusing note for the broad-based S&P 500 (SNPINDEX: ^GSPC ) , despite tacking on gains for the seventh consecutive month.
Like yesterday, which saw us rise on what I would have deemed somewhat poor economic news, the S&P 500 fell today on what appeared to be upbeat economic data. The Chicago PMI, which is a measure of manufacturing strength in the Midwest, surged to a reading of 58.7 in May, which is a strong reversal from the slight contraction it experienced in April. Furthermore, the final reading on the University of Michigan consumer sentiment index came in at 84.5, and signals that people are more confident in this recovery than they've been in years.
All that data went for naught, however, as the S&P 500 succumbed to the worries that it's come too far, too fast, and tumbled 23.67 points (-1.43%), to close at 1,630.74. In spite of today's downdraft, three companies bucked today's weakness and moved higher.
Diesel and natural gas engine maker Cummins (NYSE: CMI ) turned in a strong gain of 1.7% despite no company-specific news. In this case, I'd postulate that today's move related to the bullish Chicago PMI data, which would suggest that manufacturing activity is picking up, and that the need for newer, more fuel-efficient engines to power trucking fleets will soon follow. Cummins was certainly sitting prettier when natural gas prices were in the $2/mbtu range, but even now looks like a fantastic value, with natural gas prices topping $4/mbtu, given the high prices of traditional gasoline, and the need for trucking companies to save over the long term by investing now in fuel-efficient engines.
The story was very similar for industrial-equipment wholesaler W.W. Grainger (NYSE: GWW ) , which jumped 1.7% following the Chicago PMI data. The thesis here is that if manufacturing data remains strong, as the Chicago PMI indicated in May, it will be reflected in W.W. Grainger's bottom line in the upcoming quarters. The company already boosted the low-end of its EPS guidance last month, so the idea of an earnings beat next quarter wouldn't be that far-fetched.
Finally, heart valve product maker Edwards Lifesciences (NYSE: EW ) rose an index-best 2.3% following positive comments made by Leerink Swann. On Wednesday, Edwards Lifesciences received a warning letter from the Food and Drug Administration regarding the company's execution of its quality systems within its cardiac surgery systems segment. Edwards commented that it did not expect the letter to have a material impact on its 2013 earnings results. Research firm Leerink Swann further noted yesterday that the letter is unrelated to its lead device, Sapien, and will not affect the company's growth prospects. While certainly better news, Edwards is still valued at 18 times next year's earnings, and badly missed estimates last quarter, which would be enough to keep me planted on the sidelines.
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