Strong Sales Stats on Durable Goods Help Investors Make Hay

Surprising durable goods data propped up markets on Wednesday while investors await statements from the Federal Reserve.

The ‘Fearless Girl’ bronze sculpture looks towards the New York Stock Exchange from its roadside perch on Tuesday. (AP Photo/Bebeto Matthews)

MANHATTAN (CN) — Markets once again rose, with the Nasdaq far outpacing the other indices, as investors anxiously await statements from the Federal Reserve on Thursday.

The S&P 500 gained 1%, while the Nasdaq did even better, increasing 1.7% for the day. The Dow Jones Industrial Average remained in the positive, but the exchange gained only 0.3% for the day.

But the headline indicator driving much of the early morning investing was a positive report from the U.S. Census Bureau, which said new orders of durable goods last month increased 11.2% over June’s numbers, marking the third-straight month of positive new orders. 

The report was far above the 5%–7% many economists had predicted, with a few notable bright spots. Transportation equipment led with a nearly 18% increase, while nondefense new orders of capital goods rose 10%.

“The economy seems to be rebounding at a startlingly robust pace,” wrote economic consultant Joel Naroff. “In a rarity, there was not one major sector that posted a decline in demand. This report was filled with crazy good numbers.”

Durable goods orders plummeted in March and were even worse in April before springing back in May. They still remain lower — in some cases by double-digit percentages — than the same period last year. More worryingly, meanwhile, unfilled orders are falling, indicating that the spike in manufacturing may be running its course. 

Other negative economic indicators, while small, are needling the markets like shards of glass in a white-sand beach.

A report from the U.S. Chamber of Commerce showed that female-owned small businesses have been among the hardest hit during the pandemic.

According to a survey of about 500 small businesses, male-owned businesses are more likely to expect an increase in revenue and are more likely to hire employees.

Despite the market’s recent successes, however, the apparent disconnect between Wall Street and Main Street has not filtered to most consumers.

According to a poll by the Morning Consult this week, nearly two-thirds of voters see the stock market and overall U.S. economy as connected, while only 21% say they are not really connected.

“It is almost as if there was no pandemic and few firms or households were harmed greatly by the shutdowns and losses of income and demand,” Naroff wrote. “Am I the only one that thinks something strange is going on here?”

Most analysts and consumers think that both the markets and the overall economy would be buoyed by a drastic fall in Covid-19 cases, or a successful vaccine.

Markets rose earlier in the week after the Trump administration issued an emergency authorization for a new plasma therapy — and then dipped the next day after the head of the Food and Drug Administration walked back overly optimistic remarks about the therapy.

The use of convalescent plasma, which is derived from patients who have recovered from Covid-19 infections, has been used on at least 70,000 patients, according to the Food and Drug Administration.

Markets on Wednesday were once again encouraged by statements by Moderna, which noted that its potential Covid-19 vaccine has shown promising results in elderly patients with few side effects. Moderna’s stock gained 6.4% by the closing bell.

According to data compiled by Johns Hopkins University, nearly 24 million have contracted Covid-19 worldwide, while roughly 820,000 have died. In the United States alone, just shy of 5.8 million have been confirmed infected while almost 179,000 have died.

Investors have been patiently awaiting further comments from Federal Reserve Chairman Jerome Powell, who will speak at the Jackson Hole Symposium on Thursday morning.

“Dealers are a little bullish ahead of Mr. Powell’s update tomorrow,” said David Madden, an analyst at CMC Markets, adding that gold also has risen. “The weakness in the dollar is connected to the extremely loose monetary policy of the Fed, and in turn, that has boosted the yellow metal.”

Gold futures rose quickly in early morning trading and then remained steady at about $1,960 per ounce at the closing bell on Wednesday.

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