Durable Goods Orders in the US fell by 9.3% in June, totaling $32.1 billion and reaching $311.8 billion overall. This drop was better than the anticipated 10.8% decrease and followed a revised 16.5% rise in May. When we exclude transportation, new orders stayed the same. However, if we leave out defense, they decreased by 9.4%. The decline was mainly due to transportation equipment, which dropped by $32.6 billion or 22.4%, bringing its total to $113.0 billion.

Market Reactions

After this report, the US Dollar Index stayed strong, trading around 97.80 with a daily gain of 0.3%. We view the 9.3% decline in durable goods as a sign of market fluctuations rather than an economic collapse. This number was surprisingly better than what the markets expected. Importantly, new orders remained steady when we exclude the unpredictable transportation sector. The 22.4% drop in transportation is where traders should concentrate for market opportunities. Historically, big orders from events like the Paris Air Show can boost numbers one month, only to see a predictable decline the next. This points to examining options on major aerospace and defense companies such as Boeing or RTX Corporation for short-term strategies.

Investment Strategies

The strength of the US Dollar after the report indicates that the market is not overly concerned about the headline figure. The steady core data takes some of the pressure off the Federal Reserve, suggesting they won’t need to act quickly. We recommend strategies that benefit from a stable or slightly stronger dollar, like call options on the Invesco DB US Dollar Index Bullish Fund (UUP). To support this view, we can look at the latest data from the Census Bureau, released on May 24, 2024. It showed that durable goods orders increased by 0.7% in April, continuing a trend of exceeding expectations. This pattern suggests that the business environment remains solid, despite monthly fluctuations. Recent strength, particularly the 0.3% rise in non-defense capital goods orders (excluding aircraft), indicates ongoing business investment. This measure is essential for assessing business spending plans, and its robustness supports a positive outlook for industrial sector ETFs like XLI. We recommend positioning for consistent, steady growth instead of a sharp decline. Create your live VT Markets account and start trading now.

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