By Carlos Guillen
Equity markets have been oscillating for most of today's trading session as investors weigh mostly negative economic data against the increasing belief of no tapering for an extended period of time.
The first bit of economic data out today was durable goods orders, and the result was rather mixed as orders increased but capital goods declined. According to the U.S. Census Bureau, new orders for manufactured durable goods during September increased month-over-month by 3.7 percent to $233.4 billion, better than the Street's consensus estimate calling for a 3.5 percent month-over-month rise. Concurrently, non-defense capital goods, excluding aircraft, declined by 1.1 percent, after increasing by 0.4 percent in the prior month. These capital goods orders are considered a proxy for future business investment in items such as computers, engines and communications gear, so the decline is indicative of slowing growth in the near term.
More significantly, consumer sentiment landed lower than expected to the lowest level since the end of last year. The University of Michigan's Consumer Sentiment October result landed at 73.2, lower than the Street's expectation of 74.5, decreasing from the 77.5 reached in September and reaching the lowest level since December of last year when it was 72.9. Given the close relationship between consumer sentiment and consumer spending, this third consecutive month of sentiment decline may be indicative of slowing consumption this coming holiday season. Apparently, increasing mortgage interest rates along with slowing jobs additions to the employment backdrop are having a detrimental effect to confidence.
As it stands, the Dow Jones Industrial Average is up over 20 points, but it has been playing with losing territory at times. Investors are torn between some near term risks to the economy and the expectation of a wider time range till Fed officials begin their tapering procedure.