Makers of machinery slumped, with Joy Global Inc. reaching a six-year low, after Goldman Sachs Group Inc. cut its outlook for the industry due to weakening demand in emerging markets.
Industrial stocks in the Standard & Poor’s 500 Index are trading at the lowest level since October as a rout in commodities has sent prices to the least in 13 years.
Goldman analysts led by Jerry Revich said in a note to clients Monday that they hadn’t been negative enough on emerging-markets machinery demand after a 10 percent correction in the industry. The firm downgraded its rating on the group to cautious from neutral.
“Even after the correction, we see a challenging risk-reward for machinery due to an extended machinery downturn across commodity exporting countries,” Revich wrote.
The S&P 500 Industrials Index, which includes machinery makers such as Joy Global, is down 6.7 percent this year as sluggish international markets and a surging dollar are damping earnings at U.S. industrial giants.
The Bloomberg Commodity Index has tumbled 12 percent this year, to the lowest level since 2002. Caterpillar Inc., the largest manufacturer of construction and mining machinery, cut its full-year sales forecast last week, saying important end-user industries remain weak.
While economic conditions in the U.S. remain mostly positive, global turmoil is weighing on industrials. Chinese industrial profits decreased in June, leading to the biggest slump in Chinese shares in eight years. Data on Friday showed a private gauge of manufacturing unexpectedly declined in July to the lowest level in 15 months.
Goldman Sachs downgraded Manitowoc Co. and Terex Corp. to sell from neutral, citing a cautious outlook on capital spending for crane makers. Both companies report results on Wednesday.
Revich also downgraded Navistar International Corp. to sell and maintained sell ratings on Jacobs Engineering Group Inc., Westport Innovations Inc. and Joy Global. He lowered the 12-month price target on Joy Global to $26 from $32.
Goldman upgraded agricultural equipment stocks Agco Corp. and Deere & Co. to neutral from sell, citing margins that have been ahead of expectations due to lower raw-material costs.
Joy Global slid 3.9 percent to $25.83, the lowest since April 2009, at 4 p.m. in New York. Manitowoc lost 3.7 percent to $16.46 and Terex slid 3.7 percent to $20.69. Navistar retreated 2.5 percent to $17.22, a more than six-year low. Westport tumbled 8 percent to $3.92.