todays reason for dow trading

this report (copied below) is weighing on the dow today

tomorrow berney will be showing everyone his big stick

he'll probably say that he'll use it lightly unless things get outa hand

but he'll make sure everyone understands that it is he who is holding the stick

40


ECONOMIC REPORT
Industrial production up 0.8% in June
Capacity utilization rises to six-year high of 82.4%
By Rex Nutting, MarketWatch
Last Update: 11:47 AM ET Jul 17, 2006


WASHINGTON (MarketWatch) -- Capping the strongest quarterly growth in six years, U.S. industrial output surged 0.8% in June, boosted by strong output at factories, mines and utilities, the Federal Reserve said Monday.
Capacity utilization -- a key measure of inflationary pressures -- rose to 82.4%, the highest level in six years, the Fed reported.
"For a Fed worried about fading slack in the economy, today's report will offer little comfort," said Daniel Jester, an economist for Moody's Economy.com.
"This report only increases the odds of yet another rate hike at the August meeting," said Drew Matus, an economist for Lehman Bros, who said capacity utilization had exceeded the inflationary threshold of 81.5% for three consecutive months.
Manufacturing and utility output each rose 0.7% in June, while the output of mines rose 1.2%. Production of consumer goods increased 0.8%. Production of business equipment increased 0.7%. Production of industrial supplies increased 0.6%. Read the full government report.
For the second quarter, industrial production increased at a 6.6% annual rate, the most since the fourth quarter of 1999. U.S. production is being led by strong domestic and foreign demand for manufactured goods, by high demand for energy, and by the restoration of damaged energy production in the Gulf of Mexico.
Industrial production is up 4.5% in the past year. Industrial capacity has grown 1.9% in the past year.
"While the household sector of the U.S. economy may be shifting into a lower gear, the factory sector is shifting into overdrive," said Stu Hoffman, chief economist for PNC.
Economists were looking for a gain in output of about 0.5% in June, according to a survey conducted by MarketWatch. Capacity utilization was expected to rise to 81.9%. See Economic Calendar.
Output in May was revised up to a 0.1% gain from the previously reported 0.1% decline. Capacity utilization in May was revised from 81.7% to 81.8%.
Capacity utilization is one factor the Federal Reserve will consider when it meets on Aug. 8 to discuss further increases in interest rates. High utilization rates in industry and in labor markets can fuel inflation. Capacity utilization is about 1.4 percentage points above its long-term average.
"Rising and tightening operating rates have increasingly promoted business pricing power to push through increases in raw materials prices and recently accelerating labor costs," said David Greenlaw, an economist for Morgan Stanley.
In June, motor vehicle output rose 3.3%. Assemblies increased to a seasonally adjusted annualized rate of 11.61 million from 11.33 million in May. Auto production fell to 4.14 million from 4.34 million, while light truck production rose to 7.11 million from 6.53 million.
Industrial production excluding motor vehicles rose 0.6% in June and 6.3% in the second quarter.
Production of high-tech industries increased 1.1% after a 2% rise in May. Excluding high-tech, industrial production rose 0.8% in June and 6.0% in the second quarter.
Output in mining has finally recovered from last year's hurricanes and stands at the highest level since early 2002.
The manufacturing growth rate could slow somewhat in coming months. In a separate release, the New York Federal Reserve Bank said Monday that its Empire State index of manufacturing sentiment slipped unexpectedly to 15.6 in July, showing slower growth. The new orders index fell to a one-year low of 10.3. See full story.
The Institute for Supply Management survey "clearly points to rather slower growth ahead, with the year-over-year rate likely to slip towards 3% or so by the year-end," said Ian Shephardson, chief U.S. economist for High Frequency Economics.
Rex Nutting is Washington bureau chief of MarketWatch.