At first glance, the facts just don't add up. Bloomberg reported this morning that durable goods excluding transportation equipment rose at (and I quote) "twice the pace forecast by economists." Which sounds pretty good, but take a closer look at what it means:
Orders for durable goods other than airplanes rose 2% last month. Therefore, if that's "twice the pace forecast," analysts were only looking for a bare 1% increase. So we're really talking about a whisker's worth of difference here, folks. Hardly the stuff you'd ordinarily expect to fuel a 200-point rise in the Dow.
Meanwhile, the truly big change in the month-on-month figures is transport. It's here we see orders plummeting -- down $5.3 billion in August, with the bulk of that drop attributed to "nondefense aircraft and parts." This implies a drop in orders for business jets manufactured by Goldman Sachs (NYSE: GS ) subsidiary Hawker Beechcraft, for Gulfstreams from General Dynamics (NYSE: GD ) , and for craft from Textron's (NYSE: TXT ) Cessna division. (Did I mention that Textron is cutting guidance and laying off workers?)
It suggests, too, that orders at Boeing (NYSE: BA ) , and at key suppliers United Technologies (NYSE: UTX ) , Spirit AeroSystems (NYSE: SPR ) , and Honeywell (NYSE: HON ) , are coming in on the weak side. Or rather ... that they were in August for the industry as a whole.
Bad news? Meet good news.
It's this August weakness, I suspect, that explains the surprising strength of today's rally. If you've been following closely, you know that August was one of only a handful of months this year in which Boeing didn't have a huge amount of good news to report. This helps explain the weakness in transport orders last month. And yet, no sooner had the calendar rolled over into September, than what did Boeing do?
It announced dozens of new plane orders from Russia. It upped its promised rate of 737 airliner production once again. So the way I'm looking at today's durable goods report, it's not so much a case of bad news last month that matters, as it is a promise of the potential for a startling turnaround in production numbers when next month's report comes out.
If I'm right about that, then Boeing really could end up saving this bull market.
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