Analysts expect core durable goods orders to drop in key report

Commenting on today’s trading with core durable goods in focus, Gorilla Trades strategist Ken Berman said:

core durable goods

Megan_Rexazin / Pixabay

While the choppy, directionless days might be frustrating for some, today’s late-day strength could be foreshadowing a broad rally. The key risk measures all supported the bullish case today, with Treasury yields rallying together with stocks again, and since the Volatility Index (VIX) fell substantially, bulls have all the reasons to be optimistic even considering the Brexit-related uncertainty.

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The major indices all finished higher today, quickly recovering from yesterday’s dip, as global risk assets rallied thanks to the upbeat reports regarding the ceasefire in Syria. The Dow was up 46, or 0.2%, to 26,834, the Nasdaq gained 16, or 0.2%, to 8,120, while the S&P 500 rose by 9, or 0.3%, to 3,005. Advancing issues outnumbered decliners by an almost 3-to-2 ratio on the NYSE, where volume was in line with the average.

Core durable goods in focus

While the major indices only finished in the green thanks to the rally in the last hour of trading, all of the key sectors gained ground today. That's especially impressive in light of this morning's mixed earnings reports, as it confirms the broad strength that we saw over the past week. Materials lead the way higher thanks to the new almost one-month high in the price of oil, but consumer goods and financials were also among the strongest issues. Small-caps held up well in the face of yesterday’s sell-off, and their relative strength could support a year-end rally.

Microsoft (MSFT) reported earnings after the bell, and the tech giant beat estimates across the board, thanks to its still booming cloud-based business.  Even though Apple (AAPL) once again took over the crown of the most valuable public company, Microsoft’s strong results could propel the whole sector higher. The firm’s revenues increased by double-digits on a yearly basis, despite the global economic slowdown, and that could mean that the sectors with the highest growth rates could weather the soft patch without losing momentum.

Earnings

We have another huge day of earnings ahead of us, and besides the tech sector, industrials will be at the center of attention. Two crucial players of the e-commerce space, Amazon (AMZN) and Visa (V) will both be under scrutiny following two lackluster months from their stocks, while the numbers of Intel (INTC), Comcast (CMCSA), Danaher (DHR), and 3M (MMM) could also affect the broader market. Besides earnings, the Brexit process could provide further surprises, but according to today’s reports the European Union (EU) will only decide on a possible new deadline on Friday.

Following a few quiet days, we will have a tumultuous morning session with regards to economic numbers tomorrow. The durable goods report will be the most important report of the day, but the Markit Manufacturing and Services PMIs and the Eurozone PMIs might also have a large impact on financial markets. Analysts expect core durable goods orders to drop for the second time in three months so even a small increase could boost industrials. New home sales will also be out just after the opening bell, and following today's weak existing home sales data, the sector could use a reassuring print. Stay tuned!



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Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver