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U.S. equity indexes ease from earlier highs, transports
surge
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All S&P 500 sectors green; inds out front
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Euro STOXX 600 index advances ~1%
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Dollar, crude down; bitcoin off; gold gains
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U.S. 10-Year Treasury yield falls to ~3.92%
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MONDAY DATA: GOODS DEMAND CONTINUES TO SOFTEN, HOUSING FINDS ITS BASEMENT (1105 EST/1405 GMT) Data on Monday treated investors to a double-feature of contrasts, pitting the manufacturing sector's ongoing woes against a surprisingly strong housing print.
New orders for long-lasting, U.S.-made merchandise dropped by 4.5% in January, steeper than the 4.0% decline analysts expected and a reversal from December's downwardly revised 5.1% increase.
Line-by-line, the Commerce Department's durable goods report , which covers everything from air fryers to helicopters, showed a whopping 54.6% plunge in commercial aircraft/parts, but a 5.5% increase in defense aircraft/parts and a 3.8% rise in defense goods ex-aircraft. The drop in commercial aircraft orders can be blamed on Boeing , which reported 55 airplane orders in January, a 78% drop from 250 in December. A healthy 7% rise in computers and related items also helped soften the topline drop. But stripping away the boost of defense-related goods, new orders for durable goods slid by 5.1%. "Looking ahead, we expect durable goods activity to gradually soften in the coming months as consumers cut back on goods spending and businesses restrain investment as high borrowing costs bite and economic jitters stay high," says Oren Klachkin, lead U.S. economist at Oxford Economics. "While it may take time for the downturn to arrive, we maintain our conviction that a recession is on the way." Excluding transportation and defense - typically big-ticket items - new orders eked out a 0.4% gain. Through the lens of consumer, that bit of news could be worse. Astute observers will recall the most recent fourth-quarter GDP revision released last week, which showed consumer spending on durable goods actually detracted 0.2 percentage points from the headline, reflecting a demand shift from goods to services. On the bright side, new orders for core capital goods - which strips out aircraft and defense items and is considered an indicator of U.S. business spending plans - rose by 0.8%, much stronger than the 0.1% consensus. Separately, signed contracts for the pending sale of pre-owned U.S. homes jumped by 8.1% in the opening weeks of 2023, blasting past the 1.0% gain predicted by economists. It marks the index's biggest monthly jump since the onset of the COVID demand boom in June 2020, when buyers started flocking to the suburbs in search of social distance and home office space.
The National Association of Realtors' (NAR) report, which is considered among the more forward-looking housing indicators - signed contracts usually take a month or two to become actual - suggests some truth behind NAR's hopeful remarks upon the release of its existing home sales report on Feb. 21 that "home sales are bottoming out." NAR's Lawrence Yun repeats that mantra with this report. "Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur," Yun writes, adding "buyers responded to better affordability from falling mortgage rates in December and January." Indeed, the cost of financing a home purchase has eased in the first weeks of the year.
And hot mortgage rates, along with rising home prices, have pushed monthly home payments beyond the realm of affordability for many potential buyers, especially at the lower end of the market. Even so, the index remains 27.1% below its pre-pandemic Feb. 2020 level. Wall Street was busy bouncing back from Friday's sell-off, with broad gains across the board. Dow transports , considered an economic coalmine canary, was having a better day than most, powered by Union Pacific's surge after the railroad operator announced a leadership change.
(Stephen Culp)
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WALL STREET REBOUNDS AS INVESTORS SNAP UP BEATEN DOWN SHARES (0948 EST/1448 GMT) Wall Street’s main indexes are rebounding on Monday, after posting their worst weekly selloff so far this year last week, as investors are seeking out beaten down shares. The Nasdaq Composite is the best performing major index, rising around 1% on the day, while the S&P 500 and Dow Jones Industrial Average are each gaining by more than 0.5%. Stocks have been hurt by concerns about the impact of higher rates on expectations that the Federal Reserve will need to hike higher and hold rates in restrictive territory for longer in order to bring down inflation.
Data on Monday showing new orders for key U.S.-manufactured capital goods increased more than expected in January. Pending home sales data for January is also due at 1000 EST (1400 GMT). Benchmark 10-year Treasury yields eased from more than three-month highs of 3.978% reached earlier on Monday to 3.912%, likely helping risk sentiment improve. Here is Monday’s opening markets snapshot.
(Karen Brettell)
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S&P 500 INDEX: 50- and 200-DMA FLIRTATION (0900 EST/1400 GMT) The S&P 500 index slid 2.7% last week for its biggest weekly decline so far this year. With this, the benchmark index ended at 3,970.04 on Friday, flirting with some important support levels, including its 50- and 200-day moving averages:
The SPX ended below the support line from its October low as well as its 50-day moving average (DMA) on Friday. The 50-DMA will now present a hurdle at around 3,980 on Monday. The broken support line is resistance at around 4,005. Traders are also eyeing the February 10 low, at 4,060.79, as an important swing level. The index used its 200-DMA as support on Friday. This long-term moving average should reside around 3,940 on Monday. The broken resistance line from the January 2022 record high should be support at around 3,920 on Monday, and the January 19 low was at 3,885.54. Meanwhile, e-mini S&P 500 futures are suggesting an SPX bounce of more than 30 points at the open, so traders will be watching to see how the index acts and ends vs support and resistance for clues into what the next trend may be.
(Terence Gabriel)
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
