Durable goods orders unexpectedly fell for the second straight month as a stronger dollar hit export businesses and the slowing global econonmy cut into demand for American manufactured products.
New orders for items designed to last at least three years declined 3.4 percent in December, according to information from the Commerce Department in Washington today. It was the largest drop since August and the fourth negative month out of the last five. Economists had predicted a 0.5 percent increase.
In an unusual twist the 3.9 percent over estimate by economists in the Bloomberg survey for December was identical to the missed forecast in November when analysts had expected a 1.8 percent rise that in reality was a 2.1 percent loss.
Slackening overseas demand showed in disappointing results for Caterpillar Inc. and Microsoft with the Dow closing down 291 points 1.65 percent at 17,387. The Nasdaq shed points for a 1.89 percent loss and the S&P 500 lost 28 points 1.34 percent. Proctor and Gamble, DuPont and Pfizer reported earning that trailed estimates as well.
The dollar was also a loser as the euro maintained its level at 1.1367 at 4:00 pm after yesterday's eleven year low at 1.1096 in reaction to the opposition victory in the Greek elections and today's recovery to 1.1424. Yields on the generic 10-year Treasury lost one basis point to 1.81 percent.
Chart: FX Street
Placements for non-defense capital goods minus aircraft declined 0.6 percent in December as they had in November.
Shipments of goods in the same category, which is used in calculating gross domestic product, fell 0.2 percent following a 0.6 percent drop in November. This is a hint that fourth quarter GDP, reported on Friday, will be weaker than the current estimates of 3.0 to 3.5 percent. The U.S. economy expanded 5 percent in the third quarter.
Weakening demand from Europe where deflation may be delaying some consumer and investment purchases, emerging market countries whose currencies no longer buy as much against the dollar, and China where the government is trying to engineer a gradual slowdown and shift to a consumption economy, may all have contributed to fading demand for U.S. manufactured goods.
Excluding transportation equipement, which is often volatile month to month as orders for Boeing Company jets rise and fall, orders slipped 0.8 percent in December.
Chief Market Strategist
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