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    Factory orders in the United States drop to -1.3%, missing expectations of -1.2%

    by VT Markets
    /
    Jan 7, 2026
    Factory orders in the United States fell by 1.3% in October, which is worse than the expected drop of 1.2%. This decline is a small setback compared to what the market predicted. This drop in factory orders shows that the manufacturing sector is struggling. It could mean there is less demand or that the economy is adjusting.

    Signs of a Cooling Economy

    The factory orders report from October 2025 hinted at a slowing economy. The 1.3% decline is part of a larger trend we’ve seen developing. This suggests that the slowdown in manufacturing may not be a temporary issue. Recent data supports this view. The ISM Manufacturing PMI for December 2025 was 48.7, marking the third consecutive month below the 50-point line that signals contraction. This ongoing weakness raises concerns about corporate earnings for the first quarter of 2026. Given this trend, we should look into defensive strategies in the coming weeks. Buying put options on industrial sector ETFs like the XLI could help protect us from further declines in manufacturing-related companies. This strategy can safeguard our portfolios from an anticipated downturn in that market segment.

    Adjusting Market Strategies

    At the same time, this economic slowdown makes it more likely that the Federal Reserve will pause its rate hikes or even hint at future cuts. We saw something similar in 2019 when slowing global growth made the Fed change its approach. We can prepare for this by buying call options on long-duration Treasury bond ETFs like TLT, which tend to rise in value when interest rates go down. The growing uncertainty will probably create more volatile markets. The VIX index, which measures expected market volatility, has already increased from around 14 in late 2025 to over 18 in the first week of this year. We should think about buying VIX call options to potentially profit from these increased market fluctuations. Create your live VT Markets account and start trading now.

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