Durable Goods Orders, New Home Sales Below Estimates

- Durable Goods Orders for January fell 5.3% versus estimates of a 4.0% decline and a downwardly revised 4.4% gain in December.

- Durables Ex Transports for January fell 1.6% versus estimates of a 1.4% gain and a downwardly revised 2.0% increase in December.

- New Home Sales for January fell to 588K versus estimates of 600K and 605K in December.

BOTTOM LINE: Orders for durable goods fell more than forecast in January, Bloomberg reported. Bookings for non-defense capital goods excluding aircraft, a gauge for future business spending, fell 1.4%. Shipments of those items, used to compute GDP, gained .1%. Orders for military gear fell 20%. The 3-month average of Durable Goods Orders is -.1%, which isn’t near levels normally associated with economic contraction. The Morgan Stanley Cyclical Index is outperforming today, rising .6%. The 10-year yield is 2 basis points higher. I expect Durable Goods Orders to bounce back this month on inventory rebuilding as exports continue to boom at record levels.

Purchases of new homes in the US fell more than forecast in January, Bloomberg reported. The median price of a new home fell to $216,000 from $254,400 a year earlier. The supply of new homes at the current sales rate rose to 9.9 months’ worth. Sales fell 10% in the Northeast, which sales gained 2.2% in the West. After today’s data, the odds of the Fed lowering the fed funds rate at the March 18^th meeting by 50 basis points fell to 90.0% from 96.0% yesterday. The odds of a 75 basis point cut rose to 10.0% from 0.0% yesterday. I still expect home sales to surprise on the upside this spring on pent-up demand, lower prices and lower mortgage rates. This should make a meaningful dent in inventories.