Durable Goods Drops 4%

The Federal Reserve winds up its two-day meeting today. Look for the policy announcement at 2 pm. I don’t expect a rate cut but it will be interesting to see what the central bank has to say. I’ll be especially curious to hear how they describe the labor markets.

In Japan, Prime Minister Shinzo Abe has unveiled a truly massive stimulus program. The price tag comes to 28 trillion yen which is about $265.30 billion. That’s about 6% of Japan’s economy and it exceeds the estimates of 20 trillion yen.

In our bond market, the yield on the 10-year Treasury is now 78 basis points higher than the British 10-year bond. That’s the widest gap since 2000.

I assume that’s because our economy is doing well, but this morning’s durable goods report was terrible. It showed a 4% drop for June.

New orders fell most sharply for commercial airplanes and expensive military hardware such as ships, tanks and fighter jets. Passenger plane bookings dove nearly 60% and orders for defense capital good dropped 21%.

Stripping out the volatile transportation sector, orders fell a smaller 0.5%, the Commerce Department said Wednesday.

Still, bookings declined for makers of primary metals, fabricated parts and machinery used in a wide variety of consumer and commercial products.

One small bright spot: Orders for core capital goods, viewed as a proxy for business investment, edged up 0.2% in June after falling in the prior two months. It’s only the second increase of the year, however.

Core orders are also 3.8% lower through the first half of the year compared to the same period in 2015.

The S&P 500 is currently up by 0.06%.

Posted by on July 27th, 2016 at 10:11 am

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