Drop in Factory Orders May Be Telling Us Something

Here's a nice comparing the rate of change in growth of factory orders, released Wednesday morning with a 1% increase m/m, to the S&P 500:

click to enlarge

The blue line is factory orders. For the most part, factory orders show up ever so slightly ahead of the markets. So, with that in mind, the rate of growth on a y/y basis is slowing down. And perhaps the equities markets are going to do the same.

The way I believe, factory orders are first in line, and the reaction in the equities markets is reactionary. With that in mind, factory orders looks like it is telling us the next move in equities.

Comments

[Daniel Houston:]

I think if you use earnings growth (see: tickersense.typepad.co...) instead of YOY SP%, you'll get a tighter and clearer fit between the two variables. that said, factory orders (and durable goods orders, if you prefer the substitute) seem to be saying YOY Q1 SP earnings growth will come in 0 to negative.

2007 Apr 05 04:21 AM