US durable goods orders fell 1.4% in December to $319.6 billion, the US Census Bureau said. This came after a 5.4% rise in November and was a smaller drop than the 2.0% decline economists expected.
Excluding transportation, new orders rose 0.9%. Excluding defence, new orders fell 2.5%.
Transportation Equipment Drives Headline Drop
Transportation equipment orders fell $6.4 billion, or 5.3%, to $113.5 billion. This followed declines in two of the last three months. The drop in transportation was the main reason durable goods orders fell overall.
After the release, the US Dollar Index (DXY) stayed in positive territory and traded around 97.30.
Looking back at late 2025, the 1.4% drop in December was a clear sign that industry was slowing. But the details were more balanced. Orders excluding transportation rose 0.9%, which suggested core business spending was holding up better than the headline number implied.
That uncertainty has carried into the new year. The January 2026 report showed a weak rebound: overall orders rose 0.5%, but orders excluding transportation were flat. This points to continued caution from businesses. At the same time, the January jobs report showed a strong gain of 215,000 jobs, leaving a mixed picture.
Inflation Keeps Fed In A Bind
Inflation is the key complication. It is still above the Federal Reserve’s target, with January CPI at 3.1%. A softer industrial sector alongside stubborn inflation puts the Fed in a tough spot and could delay any rate cuts. A similar setup played out in mid-2023, when expected rate cuts were pushed back several times and markets became choppy.
For derivatives traders, this backdrop may favour volatility strategies over simple up-or-down bets. With signals pointing in different directions, options strategies that benefit from bigger moves—such as long straddles on the SPX—may fit the environment. The CBOE Volatility Index (VIX) has been rising and recently reached 17.5, up from 14 three weeks ago, reflecting higher uncertainty.
Sector trades may matter more as the durable goods report diverges by category. Traders could look at bearish positions in transportation ETFs, which are directly exposed to weaker order trends. At the same time, they may stay neutral to cautiously bullish on broader industrial funds. This approach targets the areas showing weakness without making a broad call on the entire economy.
If inflation keeps rates higher for longer, Fed-policy-linked derivatives also deserve attention. Markets have now largely removed the chance of a March cut. Fed funds futures imply under a 15% probability, down from over 60% a month ago. That shift may create opportunities in options on interest rate futures, either to hedge or to position for rates staying elevated.
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