By Carlos Guillen
Stocks got off to a great start at the beginning of today's trading session, fueled by very encouraging new orders for capital equipment and by another better than expected bit of housing data, taking the Dow Jones Industrial Average above the infamous 14,000 psychological resistance level yet again.
One bit of economic data that was overall encouraging was durable goods orders. According to the U.S. Census Bureau, new orders for manufactured durable goods during January decreased month-over-month by 5.2 percent to $217.0 billion, worse than the Street's consensus estimate calling for a 3.5 percent month-over-month decline. However, the encouraging aspect of the data was that non-defense capital goods, excluding aircraft, rose by 6.3 percent, after decreasing by 0.3 percent in the prior month. These orders are considered a proxy for future business investment in items such as computers, engines and communications gear, so with three months of stronger than expected growth in capital inventories, overall economic growth is certainly looking more promising in the short term.
Another bit of encouraging economic data came from the housing front, as the index of pending home re-sales took a turn to the upside last month after falling in the prior month. According to the National Association of Realtors, pending home sales during January jumped 4.3 percent, while economists expected a month-over-month rise of just 1.0 percent. Overall, housing data has been positive recently after bottoming out last year. While the gains have been modest, the trend is certainly solidly upward. The shrinking inventories of homes on the market, the steady gains in hiring throughout the economy, and the improvement in consumer confidence are coming together to fuel a further rebound this year; more below.
In all, the economic data has lifted the market much more than many imagined today. And at the moment, the Dow Jones Industrial Average is up over 130 points and is holding on to daily support levels.
Pending Home Sales
By David Urani
Following up on a multi-year high for January new home sales yesterday, we got the National Association of Realtors' Pending Home Sales Index which clocked in with a 4.5% increase month to month to an index reading of 105.9, the highest since April 2010 when the market was boosted by Federal tax incentives. If you exclude those months in 2009 and 2010 when the market was being artificially boosted, it was the best result since January 2007. All four major regions increased for the month.
Overall, it's a fairly straightforward result that seems to complement the new home sales result. And in what has been a strong driver for new home construction the NAR notes continued draw down of inventory, which consequentially they say led to the strongest price increases they have seen in more than seven years.