US equities rallied after an uneven and faltering start and in the process managed to register a second consecutive day of gains. In large part, much of the tailwind provided to equity markets was provided by crude oil, which rallied 2.8%, and by stronger than expected economic data. All major market indices rallied into the closing bell with leadership being provided by the Dow Industrials (+1.3%). The S&P 500 (+1.1%) and Nasdaq (+0.90%) followed up the rear. Further confirmation of the near term shift in the tone and direction of trading was yesterday’s dramatic trade lower (-7.77%) by the volatility index (VIX).
The January Durable Goods Orders data, released at 8:30 AM, provided some rather unexpectedly encouraging news for investors. However as you know, good news is not necessarily good news for investors hoping for continued economic weakness as a path to a more dovish Fed. The New Orders – M/M change was +4.9% versus consensus calling for 2.0% and December’s revised – 4.6%. New Orders were + 1.8%. Ex-transports M/M was also stronger than expected at + 1.8% versus consensus that was calling for a flat number. Core capital goods M/M was + 3.9% versus the prior months – 3.7%. The weekly Jobless claims were 272k versus consensus calling for 270k. The FHFA House Price Index M/M was 0.4% versus consensus 0.5%.
The top line data for the day today is the GDP release. Real GDP – SAAR is expected to come in at 0.4%. Consumer Sentiment remains front and center this morning. Consensus is calling for a reading of 91. Personal Income and Outlays are expected to register gains across all four sub-sectors with the exception of the PCE Price Index – M/M change.
Despite headwinds and a lack of well defined channel for shell shocked investors, how I see it is that we continue to put together piecemeal rallies, interrupted by spasms of “risk-off” that ultimately allow for equity markets to regain some composure.