S&Ps prove durable after report

Durable goods surprise to upside

U.S. equity index futures pared losses as data surprised to the upside, reversing an earlier drop of 8 points leaving them unchanged on its mid-week close. The heavyweight durable goods report offered some mild optimism Thursday and is helping support equities on a day when further unsettling reports out of the Ukraine are prompting geopolitical worries amongst investors. Demand for longer-lasting goods fell less than was anticipated although earlier recorded data was massaged lower. The headline level for orders fell by 1.0% (expected to fall by 1.7%). Stripping out the heavy concentration of volatile transport items saw core orders advance by 1.1%, the most since May. Capital goods orders also rose, important because this signals growing business confidence in the outlook. At the GDP level, shipments declined marginally hinting a weak start for the economy in the first quarter.

The advance in orders beyond transport items was accounted for by the first gain in demand for fabricated metals (+7.3%) marking its first monthly gain since August. This component comprises around 12.5% of the overall durable reading and stands lower on a year-on-year basis by 12.4%. So while its monthly rebound helps provide a girder of support to the overall reading, it is long overdue. Also helping at the headline level is demand for computers and electronics (+4.7%). This category is only marginally smaller than the metals component but demand has risen since one year ago by 0.7%.     

Chart – Durables aided by rebound in fabricated metals

About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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