Before The Bell: S&P 500

Durable Goods Data Under Performs

Today’s U.S. reports revealed an under-performance for durable goods data for orders and inventories with weakness in the transportation and defense components, and smaller than expected equipment sector gains, while the weekly MBA purchase index data revealed some pull-back after strength in early January. Currently, the Dow and S&P 500 are very bearish as we wait for tech earnings and FOMC.

The weaker than expected inventory and equipment trajectories prompted a downward bump in our Q4 GDP growth estimate to 3.9% from 4.1%, though left our Q1 GDP estimate at 3.2%. MBA pull-back is hardly problematic, given the solid uptrend into January for the headline and important purchase index component.

  • Durable orders rose 0.2% after a 1.2% (was 1.0% ) November gain, leaving an 8th consecutive increase.
  • Durable orders ex-transportation rose 0.7% after a 0.8% (was 0.4%) gain, leaving an 8th consecutive increase.
  • Transportation orders fell -1.0%, after a 1.9% (was 2.1%) gain that capped three consecutive increases.
  • Defense orders fell -6.4% after a 1.0% (was 3.7%) gain.
  • Durable inventories fell -0.2%, after a 0.9% gain that capped three consecutive increases.
  • The factory durable inventory-to-sales (I/S) ratio fell to an 18-month low of 1.68 in December from 1.70 in November and 1.69 in October, versus a 2.24 all-time high in April.
  • The MBA mortgage applications index dropped -4.1% in the week of January 22, after a -1.9% slide in the prior week but 16.7% surge in the January 8 week.

The markets are definitely bouncing around today as investors continued to process through a heavy round of corporate earnings, including results from Microsoft Corp. (MSFT), who reported strong results late yesterday. Updates from Facebook Inc. (FB), Apple Inc. (AAPL) and Tesla Inc. ( TSLA) are due after the closing bell Wednesday.


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