US durable goods orders rose by $2.6 billion, or 0.8%, in March to $318.9 billion, according to the US Census Bureau. This followed a 1.2% fall in February and was above the forecast increase of 0.5%.
Excluding transportation, new orders increased 0.9%. Excluding defence, new orders decreased 0.3%.
Durable Goods Detail
Computers and electronic products rose by $1.0 billion, or 3.7%, to $29.6 billion. This category has increased in 11 of the last 12 months.
The US Dollar Index showed little reaction to the data. At the time of reporting, it was up 0.1% on the day at 98.70.
The March durable goods report showed a headline increase of 0.8%, but we see underlying private sector softness since orders fell 0.3% when excluding defense spending. The US Dollar’s flat response tells us the market is focused on bigger issues. This data point alone is not enough to build a new trading position around.
We must place this report in the context of more important recent data. The latest Consumer Price Index reading showed inflation remains persistent at 3.5%, and the last jobs report revealed the economy added a surprisingly strong 303,000 positions. These figures are what is truly driving the market’s thinking, as they push back any expectation of near-term interest rate cuts from the Federal Reserve.
Rates Market Implications
This environment suggests that the Fed will hold rates steady, making interest rate derivatives a key area of focus. We should anticipate continued choppiness in Treasury futures as the market digests the “higher for longer” rate narrative. Options strategies on SOFR futures that bet on a lack of rate cuts in the next quarter appear sensible.
For equities, the strength in computers and electronics orders is a positive sign specifically for the tech sector. This could provide some support for Nasdaq futures or call options on tech-heavy indices. However, the broader market, represented by the S&P 500, may struggle under the weight of sustained high interest rates.
The dollar is likely to remain in a holding pattern until the next major inflation or employment data is released. This suggests that implied volatility on major currency pairs will remain low in the immediate term. Traders could use this period to position for a potential spike in volatility around the mid-May CPI report.
