We're back in the "bad news is good news" phase. At least that's how you may want to read the stock market's reaction to today's clunker of a durable goods number, its worst monthly reading since January. Durable orders fell by 4.9% in August, below the 3.5% decline expected and way off from July's 6.1% increase.
The Commerce Department's durable goods number reflects the pulse of the manufacturing economy and the health of consumption by both business and the consumer, all in one shot. So you'd think weakness in that number, on top of other bad reports the ugly August jobs report and continued bad housing news,is maybe not so good. But today, the market is taking it in stride, and is viewing this bad news as hind sight and really not quite as bad as it could have been.
It also feeds the view that bad news will force the Federal Reserve's hand when it comes to cutting rates, and with the market, there's always something to look ahead to. That next FOMC meeting is Oct. 31, and many traders are already betting on another rate cut at that meeting. "They're finding any kind of silver lining to a very dark cloud," said Peter Costa, senior managing director at Eckhart. "The market has absorbed a lot of bad news, but it's done ok for itself."
Durables goods orders includes everything from washing machines to air craft. July's gain reflected a buildup by auto dealers in anticipation of the United Auto Workers strike. General Motors and the United Auto Workers reached an agreement overnight ending a short strike.
Oil prices were all pumped up until 10:30 a.m. New York time when Department of Energy inventory data came out showing the first build in inventories in more than a month. Gasoline supplies also increased. Oil is sliding and so is gasoline. Oil inventories rose by 1.8 million barrels to 320.6 million barrels, but are still 3.5% below last year's level.
In the stock market meanwhile, the S&P energy sector is the only stock group moving lower this morning. It is off about 0.2% despite a big buyback announced by oil major Chevron this morning.