Issue: 9/26/07 Wednesday
Today was an UP day in the stock market; up 100 points. The DJ30 is approaching 14,000 as the bulls are beating the heck out of the bears. Oil turned around and came back up above $80/barrel, so that ends the slide in oil prices. The rest of the market took a rest.
Demand for big-ticket manufactured goods plunged in August by the largest amount in seven months, with widespread weakness signaling a slowdown in the nation’s industrial sector. The Commerce Department reported Wednesday that orders for durable goods, everything from commercial jetliners to home appliances, fell by 4.9 percent in August, the biggest decline since a 6.1 percent fall in January. The concern is that the steep downturn in housing and turbulence in financial markets could start to affect the economy more broadly, raising the risks of a full-blown recession.
Don’t get too excited about durable goods. It is a lag-indicator for big industry, so has an affect on what the future manufacturing could be. It is not the most reliable indicator in the world, and it’s better to have 3 months down in a row to really believe something is going on. Last month was a big UP month, so this could be just a correction in the accounting of the statistics.
In a favorable development for the economy, the United Auto Workers and General Motors Corp., agreed early Wednesday to a tentative contract that ends a two-day national strike. A lengthy strike against the nation’s largest automaker could have had ripple effects that would have dragged business growth down even further. (These negotiations are always fun to watch because whatever GM agrees to, the other big auto makers are generally stuck with. So now the negotiations go over to Ford and Chrysler.)
Philly Fed president Plosser said last night that a rate hike can be expected should inflation begin to tick up again. Bonds have not found much comfort in that thought. The Fed gets out the message about inflation even when the majority of folks think a recession is much more likely. Ever wonder why???
Here are Today’s closing details:
DJ30 – 13,878 (Up 100 points, or 0.72%)
10 year US Treasury Bond – 4.62% (Up 0.01%)
US Dollar - $1.4128/Euro.
Gold closed at $736 per ounce. (Down $3)
Oil Closed at $80.30
Gasoline is $2.03
