New orders for long-lasting U.S. manufactured goods rose more than expected in April, boosted by bookings for expensive aircraft, government data showed on Wednesday, but fell for the first time in three months excluding transportation.
KEY POINTS: * The Commerce Department said durable goods orders increased 2.9 percent to $193.89 billion, the highest since September 2008, after being flat in March. * Analysts polled by Reuters forecast orders increasing 1.3 percent in April from March's previously reported 1.2 percent decline. * Boeing Co received 34 orders for the pricey 777 aircraft last month, according to information posted on the company's website, though less than the 43 bookings for its 737 plane in March. * Non-defense aircraft orders jumped 228 percent in April following a 71.2 percent drop in March. Vehicle orders increased 1.6 percent after a rising 4.5 percent the prior month.
LOU BRIEN, MARKET STRATEGIST, DRW TRADING GROUP, CHICAGO:
The report on Durable Goods Orders was a mixed bag. April headline orders were much better than forecast at +2.9 percent, but the orders ex-transportation were much weaker at -1.0 percent. However the previous month was revised higher for both components. The strength in the headline was a massive gain in non-defense aircraft orders.
MICHAEL WOOLFOLK, SENIOR CURRENCY STRATEGIST, BANK OF NEW YORK:
I think you have to average the last two month's worth of durables data, and it's definitely better than expected and consistent with the economy growing at a 3-4 percent pace this year. The economy is unimpeded by the turmoil in Europe for now. After the flash crash, perspectives changed, and the market was willing to view problems in Europe as potentially dangerous for global growth. I think that's still premature at this stage.
Markets are more technically oriented right now, with an eye on performance of the Dow and equity markets globally. We had a very nice rally in Europe today, and the Dow is looking up, so it should be a good day. But positive U.S. economic numbers are likely to feed into that rally, and that may slow down the safe haven move back into the dollar. The dollar now is like a steam locomotive going up a very steep grade. It takes more and more fuel to keep it moving. Eventually the market has to correct.
PETER BOOCKVAR, EQUITY STRATEGIST, MILLER TABAK, NEW YORK:
Durable Goods orders rose by more than twice expectations and March was revised higher but it was all aircraft orders as excluding transports, orders fell by 1 percent versus an expected rise of 0.5 percent. But, March excluding transports were revised up by 2 percentage points, thus taking the two months together has the data above expectations. Bottom line, the data has always been volatile as evidenced by the sharp revisions to March but is still good overall. The real test remains though what impact China and Europe will now have on US growth that this data didn't reflect.
TOM SOWANICK, CHIEF INVESTMENT OFFICER, OMNIVEST GROUP IN PRINCETON, NEW JERSEY:
Durable goods are quite strong. Although excluding transportation we are negative 1 percent, there was a two-point revision. So we had an increase of net 1 percent versus expectations of 0.50 percent. The data continue to support a V-shaped recovery at this point. I think that what we saw yesterday was a classic capitulation trade where people threw in the towel. A 3 percent rise from the bottom shows you that these are enormous moves and they do represent fear but also it tells you that short-covering can have a powerful impact.
GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS MISSOURI:
It looks like a good number on the surface but most of it is from a huge increase in aircraft orders after a big drop in aircraft orders in March. The trend in orders is still up. During the recovery, manufacturing is benefiting
a lot from companies restocking depleted inventories. The news from the manufacturing sector is still positive.
JOHN CANALLY INVESTMENT STRATEGIST AND ECONOMIST, LPL FINANCIAL, BOSTON:
We now have five quarters of increases, and that's a good sign of transitioning from a recovery to sustainable growth. It's the same story in shipments. There were strong increases in the second quarter from the first, which is a plus for GDP.
It's too early to gauge the impact of the European crisis, but at least through April you had exports and business capital spending hitting on mainly all cylinders. Probably have to wait until May or even July to see an impact.
MARK VITNER, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA:
The headline is skewed by the big jump in aircraft orders, which is hard to predict. When you exclude that, the number is weaker-than-expected.
The outlook for capital spending remains fairly upbeat. Non-defense, ex-aircraft shipments are running at about a 15.2 percent annualized clip in the first three months of the year. We are going to see another robust gain in GDP, which we expect to come at 3.5 percent.
But we are very concerned about growth in the second half of the year. It could slide toward the 2 percent level. Business investments will hold up in the second half of the year, but they could take a hit from the European financial crisis.
MARKET REACTION: STOCKS: U.S. stock index futures hold gains BONDS: U.S. Treasury debt prices hold losses DOLLAR: U.S. dollar holds extends gains versus euro