U.S. durable goods surge as transportation orders drove gains, core investment improved, as markets await a likely dovish Fed pause decision.
New orders for manufactured durable goods that are expected to last at least three years rose 5.3% month over month (MoM) in November, reversing part of October’s 2.1% drop, according to a report released by the Census Bureau, the statistical arm of the U.S. Commerce Department, on Monday.
November’s performance marked the third increase in four months, and it bettered the economists’ consensus forecast of 3.1% growth.
Source: Commerce Department
Transportation equipment orders provided a big boost, surging up 14.7%. Buoyed by new orders received at the Dubai Air Show, Boeing reported net new orders of 126 in November. Excluding volatile transportation orders, durable orders grew at a monthly pace of 0.5%, exceeding the 0.3% forecast. When defense orders are stripped, durable goods rose by 6.6%.
Non-defense capital goods orders, excluding aircraft — considered a proxy for capital spending, climbed 0.7% following a 0.3% increase in October.
Stock Futures Rise, Bond Yields Dip: Following the stronger-than-expected data, ES-Mini S&P 500 futures reversed course and moved marginally into the positive territory. The 10-year U.S. Treasury note yield, which cut its losses immediately after the data, has reversed course. The U.S. Dollar Index hasn’t found enough momentum to pare its losses.
What To Watch Next: The next major catalyst for the futures market would be the Federal Reserve’s rate decision due on Wednesday. Futures traders have priced in a 97.2% probability of a pause decision. Morgan Stanley economists expect the Fed to deliver a “dovish hold” at the meeting. “Recent stabilization in the labor market may be enough to justify a pause, but potential disinflation later this year should mean the Fed maintains an easing bias,” strategists led by Chief Economist Michael Gapen said.