We’re getting an over-sold, bargain-hunter’s bounce in stocks this morning
Asian and European markets kept yesterday’s end of the day recovery in New York stocks going overnight and that then fed back into stock prices in New York at the open today, May 26.
If you’re an investor looking for signs that this is more than a bounce, it’s tempting to see good news on the U.S. economy in this morning’s release on durable goods orders for April. Economists had been hoping for a 1.5% increase in orders after a flat March. Instead they got 2.9% growth. That’s an extremely positive number.
Well, it is if you’re Boeing (BA). It’s not nearly as clear how good the number is for the U.S. economy in general.
For the month, the numbers show a 228% increase in orders for nondefense aircraft. That largely represents a big surge in orders at Boeing that contributed 3.9 percentage points to April’s 2.9% growth rate. In other words, without the surge in aircraft orders, a notoriously lumpy number with huge swings from month to month depending on the timing of big orders, the headline 2.9% increase in durable goods orders would have actually shown a decline.
The not-so-good news on the U.S. economy continues if you look at orders of nondefense, non-aircraft capital goods, the stuff that businesses buy when their planning to expand production. In April those orders fell by 2.4%.
I point to these less-than-promising numbers this morning not to send you screaming off a ledge, but to remind you that the U.S. economic recovery remains fragile but on track (if you look at all the recent economic data.) And to keep you from getting too giddy over today’s stock market action.
This remains a very risky market and a very uncertain global economy. Tread carefully.