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Here's Today's Key Takeaway For Equity Investors

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Here's Today's Key Takeaway For Equity Investors

por Figas » 5/8/2003 10:47

TradingMarkets.com
Here's Today's Key Takeaway For Equity Investors
Monday August 4, 7:10 pm ET
By Edward Allen


Although today's favorable factory order data was already priced into the financial markets--the report uses data from last week's durable goods orders data--it nevertheless confirms that the positive economic fundamentals remain in place. The data is a positive confirmation for equity investors since rising orders, to a large extent, signal an improvement in business spending, which, in turn, reflects better profit expectations on the part of businesses.
To be specific, new orders for manufactured goods increased by $5.5 billion or 1.7% in June to $326 billion. More importantly though, non-defense orders--which are a fairly good barometer for business outlook-- rose by 1.5% for a third month in four.

As can be seen in the chart below, the strong historical correlation between the S&P 500 (CBOE^SPXNews) and factory orders is due to the fact that businesses typically pick up their spending in anticipation of improving demand and therefore profits.

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Ed Allen
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