Market Wrap – Durable Goods Beat

Stocks markets rallied sharply this afternoon after US Durable goods orders fell sharply, which pushed back on the narrative that the Fed will need to immediately and aggressively raise rates.

The Nasdaq and the S&P500 started strongly on the back of this data alongside the Dow Jones Industrial Average, while the VIX tumble by 3 percent intraday.

Saying that the volatility in the market was quite exceptional during last Friday’s session so maintaining that volatility was always going to be a struggle.

In the FX market the US dollar slides on the back of the weaker data, with the EURUSD pair advancing towards the 1.0600 marking a solid intraday recovery.

Breaking down the data, Durable goods orders in the US, which measure the cost of orders received by manufacturers of goods meant to last at least three years, sank 4.5% month-over-month in January of 2023, the most since April of 2020, and reversing from a downwardly revised 5.1% jump in December.

Figures compare with market forecasts of a 4% decline, prompted by a 13.3% slump in orders for transportation equipment, namely orders for non-defence aircraft and parts (-54.6%). Excluding transportation, durable goods orders were up 0.7%.

Meanwhile, orders also declined for capital goods (-12.8%), namely nondefense ones (-15.3%). On the other hand, orders increased for machinery (1.6%) and computers and electronic products (0.5%).

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, increased 0.8%, reversing from a 0.3% fall in December.

More bad data was also seen as the Federal Reserve Bank of Dallas’ general business activity index for manufacturing in Texas slipped 5.1 points to -13.5 in February of 2023, from -8.4 in the previous month.

The release marks the tenth consecutive month of contraction in activity. The new orders index was negative for a ninth month in a row and moved down nine points to -13.2; and the production index, a key measure of state manufacturing conditions, edged down from 0.2 to -2.8, a reading suggestive of a modest contraction in output.