Attention about to shift back to the economic data

With most of the biggest companies having already reported Q3 earnings, attention shifts to a slew of important economic data over the next few weeks and also the two day FOMC meeting concluding a week from today. With the stock market getting tired (4 failed rallies in the past 5 trading days) and in correction mode, the Oct economic data coming will help to begin to clarify if the Q3 bounce is sustainable. ABC confidence fell 1 pt to -51, the lowest since July led by the Buying Climate (measures whether it’s a good time to buy things) component which fell to the lowest since Dec ’08. The MBA reported further evidence that the home buying tax credit hangover is continuing as the weekly purchase component fell for a 3rd straight week by 5.2% to the lowest since May. Refi’s fell 16.2% and is down 30% in the past two weeks. Benign, but rising, inflation data in Germany and an SAP earnings miss has the euro lower vs the US$.

Sept Durable Goods was about in line with expectations both headline and ex transports. Orders rose by 1% and were up .9% ex transports. Non Defense Capital Goods ex Aircraft were up 2% after the prior two months of declines. Orders for vehicles and parts in particular fell .1% after the two prior month gains. The core gain in orders was led by a 7.9% rise in machinery. Computers/electronic orders fell for a 2nd month. Shipments, which get directly plugged into the GDP calculation, rose .8% and are up for all of Q3, thus contributing to the Q3 GDP rebound which we will see confirmation tomorrow. Inventories fell again and the inventory to shipments ratio is down to 1.77 from 1.80 to the lowest level since Oct ’08. The moderation in the inventory decline in Q3 relative to Q2 will also provide a statistical boost to Q3 GDP. The Q3 GDP rebound is old news now and thus sustainability is the open question.

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