Business Spending Dives, Durable Goods Orders Fall, Recession Looms

Business Spending Dives, Durable Goods Orders Fall, Recession Looms

Business Spending Dives, Durable Goods Orders Fall, Recession Looms

$DIA, $SPY, $QQQ, $VXX

Orders for big-ticket manufactured goods dipped in September as a Key category that tracks business investment fell by the largest amount in 7 months.

Orders for durable goods edged down 0.1% in September after gains of 0.3% in August and 3.6% in July, the US Commerce Department said Thursday.

Orders in the category that serves as a proxy for business investment plunged 1.2% in September, the biggest setback since a 2.1% drop in February.

US manufacturing has struggled this year as American companies have been confronted by a strong USD which makes US exports more expensive in foreign markets and by the effects from a big fall in Crude Oil prices which triggered big investment cutbacks at energy companies.

Analysts said the big decline in orders in the investment category was disappointing but noted that this category had been posting a string of positive readings in recent months that indicate investment may finally be starting to recover after a prolonged period of weakness.

The government will release its 1st look at overall economic activity Q-3 on Friday and analysts are hoping that the GDP (gross domestic product)will rebound to growth around 2.5 to 3% from anemic GDP readings of 0.8% in Q-1 and 1.4% in Q-2.

For the September frame, orders were weak in a number of areas.

Demand for primary metals such as steel fell 0.3% while demand for computers dropped 8.6%.

Orders for civilian aircraft, a volatile category, jumped 12.5%, but that increase followed a 24.2% dive in August. Demand for military aircraft fell 44.8% in September.

Demand for machinery was up 1.2%, while orders for appliances and other electrical equipment rose 1.5%.

The Fed Labor Market Conditions Index signaling Recession ahead.

After falling only 3 times from Y’s 2012 to 2015, the index has fallen every month of Y 2016 except for one, July. And in July the annual change in the LMCI, from July 2015, turned Negative.

That’s only the 8th time in nearly 40 years the index was down on a Y-Y basis. Of the 7 previous occasions, 4 were soon followed by recession.

In the 3 other cases, 2 were false alarms, in 1986-87 and 1995-96, and in 1981 the recession began shortly before the annual change in the LMCI turned negative. Caution

Thursday, the US major stock market indexes finished at: DJIA -29.65 at 18169.68, NAS Comp -34.29 at 5215.98, S&P 500 -6.40 at 2133.03

Volume: Trade was heavy with 960.5-M/shares exchanged on the NYSE

  • Russell 2000 +4.7% YTD
  • S&P 500 +4.4% YTD
  • DJIA +4.3% YTD
  • NAS Comp +4.2% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Neutral (-0.12) Neutral (-0.12) Bearish (-0.35) Neutral (0.11)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (-0.22) Bearish (-0.33) Bearish (-0.44) Neutral (0.10)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (-0.00) Neutral (-0.13) Neutral (-0.17) Bullish (0.29)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.27) Bearish (-0.45) Bearish (-0.25) Neutral (-0.12)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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