(By Rich Bieglmeier) Anybody who follows economic news knows that this morning's Durable Goods Orders (DGO) report was a disaster. Folks with real lives and jobs, who use the market to make more gold coins with their gold coins, should pay special attention to the DGO report.
Unlike almost all the other reports, DGO is forward-looking and drops hints on the future of the economy. Most other economic news releases just tell you what happened.
In this a.m.'s announcement, the Census Bureau reported, "New orders for manufactured durable goods in August decreased $30.1 billion or 13.2 percent to $198.5 billion." Of the areas monitored by the bureau, only inventories went up, which usually not good. Think about it, less demand and rising inventories? That's a recipe for another disaster if it lasts too long.
Of all sectors of the economy that the report covers, just three parts managed to be in plus territory for August:
- Shipments for communications equipment up 3.3 percent, although, new orders were down 7.1 percent.
- New orders for electrical equipment, appliances, and components up 3.8 percent.
- Defense aircraft and parts shipments up 5.1 percent, but new orders down 8.1 percent.
As Porky Pig says, that's all folks. Otherwise, every other measurable sector of the economy covered by the survey posted red numbers for shipments and new orders.
Since electrical equipment, appliances, and components posted the sole rise in new orders, investors might consider stocks such as Cooper Inds Plc (CBE), Ab Electrolux (ELUXY), Whirlpool Corp (WHR), and Arrow Electronics (ARW), just to name a few.
According to this morning's report, non-defense aircraft and parts were the hardest hit, with new orders dropping by an unimaginable 101.8 percent. Did somebody return a fleet of airplanes or something? Well, actually that's what happened as Qantas canceled an $8.5 billion order for Boeing (BA) 787s in August, and Qantas will receive $433 million from Boeing in compensation for delays and a refund of deposits for the canceled order. You might want to think twice about adding BA to the portfolio.
Transportation equipment took the second hardest punch as new orders dropped 34.9 percent - ouch. Some of the companies that might feel the pinch include Advance Auto Parts (AAP), Goodyear Tire & Rubber Company (GT), O'Reilly Automotive (ORLY), and others for auto-parts. Besides BA, General Dynamics (GD) and Lockheed Martin (LMT) could suffer from both transportation equipment and nondefense aircraft and parts.
Savvy investors can dig through the Durable Goods Orders report to get a sense of what might become hot, and what might not. At the very minimum, it is one you should add to your required monthly reading.