Don’s Notebook May 25, 2018

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This morning the Durable Goods Orders report from the Bureau of the Census, implied tariff-related price inflation may be driving up dollar totals in the factory sector which, based on the April advance durable goods report, has gotten off to a very strong start for the second quarter. Excluding aircraft and other transportation equipment, durable goods orders rose 0.9 percent to beat analysts’ consensus by 3 tenths.

  • This report is closely watched because the bond market will rally (fall) when durable goods orders are weak (strong). A moderately healthy report for new orders bodes well for corporate profits and the stock market.
  • Durable goods orders are one of the most volatile economic indicators reported in the month and this series can be revised by significant amounts from one month to the next.

Overnight, the MSCI Asia Pacific Index fell 0.2 percent, while Japan’s Topix index closed 0.2 percent lower as that gauge capped its biggest weekly decline since March, with automakers the biggest drag.

  • In Europe, the Stoxx 600 Index was 0.5 percent higher on its close, as equities rebounded following North Korea’s olive branch, while Italian stocks remained volatile.

The University of Michigan consumer sentiment report delivered a downgrade in the current assessment pulled down the final May reading for consumer sentiment to 98.0 which is 8 tenths lower than the May flash.

  • Current conditions fell to 111.8 vs 113.3 at mid-month and down from 114.9 in April. The decline hints at weakness for May’s job market and in turn for May’s consumer spending as well.

Fed Chairman Jerome Powell participated on a central banking panel in Stockholm, Sweden. Chairman Powell discussed the importance of the Fed’s independence in its efforts to manage the economy.

  • Dallas Fed President Robert Kaplan, Atlanta Fed President Raphael Bostic and Chicago Fed President Charles Evans are all making an appearance on a panel in Dallas this morning

At 1:00 p.m. ET, oil traders will get more information to consider in an already busy day when the latest Baker Hughes rig count is released.

Please spend some time considering the meaning of our Memorial Day Holiday Monday and visit TradeStation again on Tuesday, May 29th.

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Dr. Don Pratl is Director of Trader Development and Education for TradeStation. He joined TradeStation in 2016 after holding similar roles with other online brokerages. Don’s long career in the financial services industry reflects expertise in administering trading and investment strategy programs for retail investors as well as financial services professionals. Since the 1980s, he has held various positions in areas including CBOE trading floor order execution, marketing, sales, personnel management, training and customer service. Don holds series 3, 4, 7 and 63 FINRA licenses, earned his Ph.D. in Organization and Management, and his M.A. and B.A. in Political Science. He has been an occasional adjunct college instructor since 2004 at a range of institutions, teaching undergraduate, graduate and doctoral students using in-class and online formats.