Durable Goods Orders Improve, Jobless Claims Plunge, New Home Sales Decline

- Durable Goods Orders for March fell .3% versus estimates of a .1% gain and an upwardly revised .9% decline in February.

- Durables Ex Transports for March rose 1.5% versus estimates of a .5% gain and an upwardly revised 2.1% decline in February.

- Initial Jobless Claims for this week fell to 342,000 versus estimates of 375,000 and 375,000 the prior week.

- Continuing Claims fell to 2934K versus estimates of 2990K and 2999K prior.

- New Home Sales for March fell to 526K versus estimates of 580K and a downwardly revised 575K in February.

BOTTOM LINE: Orders for US durable goods excluding transportation equipment rose more than forecast last month, Bloomberg reported. Total orders fell .3% due to a 20% decline in defense-related orders. A rebound in demand for machinery, combined with continued increases in computer bookings, paced the rise in the non-transport category. Bookings for non-defense capital goods excluding aircraft, a gauge of future business spending was unch. versus an upwardly revised 2% decline in February. Shipments of those goods, a number used to compute GDP, jumped 1.2%. Orders for computers and electronic products surged 1.9% and demand for machinery jumped 6.2%. This report is even more impressive considering the American Axle(AXL) strike that is approaching its third month and has left over 30 General Motors plants partially closed or completely idled. GM said yesterday that the strike had cost it sales of 7,000-10,000 vehicles to fleet buyers and had reduced inventories. Moreover, about 48,000 GM employees have been affected by the strike, representing half of the automaker’s manufacturing workforce in North America. I expect overall Durable Goods Orders to rise slightly this month and improve meaningfully later this year.

The number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week to a two-month low, Bloomberg reported. The four-week moving average of jobless claims fell to 369,500 from 376,750 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at a historically low 2.2%. At 342,000, jobless claims are nowhere near levels normally associated with economic contraction. I suspect jobless claims have peaked for the year and will trend modestly lower through year-end.

Purchases of new homes in the US fell more than forecast in March, Bloomberg reported. The median sales price declined to $227,600 from $262,600 the prior year. The number of homes for sale fell to a seasonably adjusted 468,000, the lowest since July 2005. However, the supply of homes at the current sales pace rose to 11 months. I suspect March was the low for the year in New Home Sales and that they will bounce higher over the coming months on lower prices, lower interest rates, pent-up demand and less economic pessimism. The US Dollar is surging the most since 2004 against the euro on today’s reports. As well, according to Intrade.com, the odds of a US recession beginning this year have fallen to 56% from 79% a few weeks ago. I still believe the dollar has put in, at the very least, an intermediate-term bottom. A meaningful rally in the dollar could be the catalyst that finally pops the current commodity bubble, which would be a major positive for the broad US stock market. Despite all the fear mongering hysteria by commodity bulls over food prices, the S&P Goldman Sachs Ag Spot Index peaked February 27 and has since declined -16.3%. This index appears to me to have already made a major top. The 10-year TIPS spread, a good gauge of inflation expectations, is falling 2 basis points today to 2.32%, which is down from 2.68% on March 13^th.