Al Root

The U.S. manufacturing economy gave investors some good news on Monday: a second consecutive month of growth.

The Institute for Supply Management's Purchasing Managers Index, or PMI, came in at 52.4 in February, down slightly from 52.6 in January. Economists surveyed by FactSet expected a reading of 51.8, so the result was better than expected.

A reading above 50 indicates growth. February was down from January, but any growth is good. The January reading snapped a 10-month streak of decline.

The January 2025 reading was positive at 50.9, snapping a streak of 26 consecutive months below 50, after all revisions. (ISM revises readings once a year in January.) All told, the ISM PMI has only been above 50 three times in the past 40 months. (There was also one 50 reading.)

"The big question with January's surprisingly strong ISM report was whether it represented a statistical blip or a more meaningful firming of sentiment with the industrial sector," said ION Asset Management's Michelle Lee in an email. "February's report increases the odds of the latter."

She was also encouraged by low customer inventories, which points to higher future demand.

Another gauge of future demand is the New Order Index. It was 55.8, in positive territory but down from 57.1 in January.

"U.S. manufacturing activity remained in expansion territory, although growing at a slower pace than the month before," said Susan Spence, chair of the ISM Manufacturing Business Survey Committee. "The Employment and Inventories indexes remained in contraction."

The employment index was 48.8, which indicates manufacturers are shedding jobs.

That reflects some ongoing caution in the sector. One survey respondent said economic activity is challenging this year.

"Some recovery in certain sectors in the economy, but still lot of cost pressures and soft demand," the respondent said. "Cost discipline is the priority."

The State Street Industrial Select Sector SPDR ETF was up 0.7% in midday trading, leaving it up 31% over the past 12 months. There are 79 stocks in the ETF, including airlines, Caterpillar, GE Aerospace, railroad CSX, Deere, and others; 43 shares were up in midday trading, led by defense stocks. Taser-maker Axon Enterprises was up almost 5%, and so were the shares of the defense contractors RTX and Northrop Grumman.

Shares of Delta Air Lines and United Airlines were down about 2% and 3%, respectively. Shares of building products distributor Builders FirstSource were down almost 4%. Bond yields were up on Monday, making renovations a little more expensive.

Broader growth in the industrial economy, outside of recent pockets of strength in aerospace and data centers, is good for the sector. Some of that is reflected in stocks.

The median price-to-earnings ratio in the ETF is about 24 times estimated 2026 earnings, up from 20 times a year ago.

Write to Al Root at allen.root@dowjones.com

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March 02, 2026 13:32 ET (18:32 GMT)

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