Wednesday, June 24, 2009

Durable Goods and Today's Action

New orders for durable goods exceeding economists' estimates, climbing to $163.9 billion for the month of May (March & April numbers were revised a bit lower). Once again, could this signal a bottom? Sure, why not? However, this number is still running 25% lower than it was during 2008. This is certainly a casualty of the housing collapse. Not only are the builders and construction workers directly effected, but appliance factory workers, shippers, etc. are impacted as well.

Yesterday's data included existing home sales. The number came in a bit lower than the consensus estimate. Inventory moved a bit lower, but prices are still well below the trend line. Until housing stabilizes, neither the manufacturing or financial sector will recover.

On a related note, S&P downgraded several securities backed by jumbo prime mortgages. The surprising part of it: paper issued as early as 1998 was impacted. Since mortgages written that far back are not generally characterised by terrible underwriting standards (like 2005 - 2007, especially 2007), one could imply that job losses to stable bill payers are taking their toll on the housing market.

Equity futures are moving higher, Treasuries are moving lower and the dollar can't find a buyer. I can't imagine that much will happen before the Fed announcement this afternoon.

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