According to the Census Bureau, new orders for manufactured durable goods in February decreased $3.6 billion or 1.7 percent to $210.6 billion, the second consecutive monthly decrease following a 4.7 percent January decrease. Tony Crescenzi says this report is consistent with a recession, and the market seems to agree.

However, suppose the news release had read “new orders for manufactured durable goods in February increased $8.4 billion or 4.3% to $208.1 billion compared to the year-ago period. This marks the third consecutive monthly increase, following year/year gains of 4.2% in both December and January.” 

Would the market have reacted more kindly to that rephrased release? It isn’t an academic question, because either paragraph is technically correct. The Census Bureau, as is its custom, reported the one-month change after making seasonal adjustments. My alternate version simply takes the one-year change in the data before the adjustments are made.

New orders for long-lasting U.S.-made manufactured goods fell by 5.3 percent in January, the biggest drop in five months and more than analysts expected, and a key gauge of business spending also declined, a Commerce Department report showed on Wednesday.

But the news wasn’t all bad. Some industries look like a recovery may be beginning.

Consider computers and electronic products.

Or semiconductors.

Or machinery.

These changes are all based on non-seasonally adjusted data from the U.S. Census Bureau.

According to the Census Bureau’s durable goods report:

New orders for manufactured durable goods in July increased $12.9 billion or 5.9 percent to $230.7 billion, the U.S. Census Bureau announced today. This was the fifth increase in the last six months and at the highest level since the series was first stated on a NAICS basis in 1992. This increase followed a 1.9 percent June increase. Excluding transportation, new orders increased 3.7 percent. Excluding defense, new orders increased 4.9 percent.

The news was generally treated quite favorably, such as this article from Reuters:

Analysts polled by Reuters were expecting durable goods orders to rise by 1 percent. Non-defense capital goods orders excluding aircraft, viewed as an indicator of business spending, gained 2.2 percent, the steepest climb since March.

U.S. stock index futures and the dollar rose on the strong economic news, while government debt prices pared gains….

Orders for computers and electronic products and machinery posted their sharpest gains since November 2006.

All of which, I suppose, is true - on a seasonally adjusted, month-over-month basis. On the year/year basis I prefer, which should not require any seasonal adjustments, the picture is a little - just a little - darker.

There was a clear improvement - but in the longer outlook it wasn’t exactly breaking free of a downtrend and essentially resembled the September 2006 and April 2007 spikes that turned out to be head fakes. While it is certainly better than yet another decline, I’m not ready to throw a party. I did, however, shift the durable goods chit in my economic data table from the “bad and deteriorating” column to the “bad but improving” column. (By the way, subscribers can download my full spreadsheet with tables for all the major industry groups.)

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EconomicData

As to that spike in computers and electronic products, attribute it primarily to electronic products. The year/year change for computers continues to plummet.

Given the strength we’ve seen from several of the computer manufacturers, the data doesn’t bode well for Dell’s (DELL) earnings report this week.

About the only thing that can be said in favor of June’s overall durable goods orders is that they weren’t as bad as they were in February.

So that’s all I’m going to say.

The Economic Calendar is quiet in the early part of this week but there are important reports at the end of the week. On Thursday is the Durable Goods report, for which the consensus estimates a 2.0% increase. On Friday is the Preliminary Estimate of 2Q GDP, which the consensus has pegged at 3.2%. That sounds a little high to me based on the economic data table I’ve been compiling.

EconomicData

The Earnings Calendar is as busy as it can get. Some of the names I’ll be watching:

Monday

• Altera (ALTR) - Xilinx (XLNX)  filed an awful report. Can Altera do any better? Consensus is $0.19 EPS on sales of $314 million.
• Hexcel (HXL) - This Small Cap Watch List (Track at Marketocracy) member was seeing rising estimates until last month, when they were cut from $0.20 to the current $0.17.
• Steel Dynamics (STLD - Annual Report) - The Mid Cap Watch List (Track at Marketocracy) member is expected to earn $1.04 on sales of $948 million.
• Texas Instruments (TXN - Annual Report) - expected to earn $0.42 on $3.45 billion in sales.

Tuesday

• CH Robinson (CHRW - Annual Report) - estimates have been rising and now stand at $0.47, but Landstar (LSTR - Annual Report) disappointed.
• CDW Corporation (CDWC) - stellar monthly sales reports have kept estimates rising. They now stand at $0.97.
• EMC Corporation (EMC - Annual Report) - The big news is still the VMWare IPO, but it is also a decent look at enterprise tech spend.
• Laboratory Corporation of America (LH) - The Mid Cap and Large Cap Watch List (Track at Marketocracy) member has been seeing positive earnings revisions and is now expected to earn $1.09 on $1.03 billion in revenue.
• Lexmark (LXK) preannounced and will probably offer poor guidance.
• Linear Technology (LLTC) - expected to earn $0.35 on $267 million in sales.
• Norsk Hydro (NHY) - The Large Cap Watch List (Track at Marketocracy) member has no analyst coverage right now.
• Plantronics (PLT) - my covered call position is now being cashed out so I’ve no skin in this one. But it is often volatile.
• United Parcel Services (UPS) is a great read on the health of the economy. Expectations are $1.03 on $12.23 billion in revenue.

Wednesday

• Arkansas Best (ABFS) - after Landstar’s (LSTR - Annual Report) weak quarter I’m expecting a poor showing. Estimates have come down to $0.67, but may not have come down enough.
• Colgate Palmolive (CL) - Large Cap Watch List (Track at Marketocracy) member unlikely to surprise much. Consensus is $0.83 on $3.31 billion.
• Corning (GLW - Annual Report) - is LCD supply/demand back in balance?
• Freeport McMoRan Copper & Gold (FCX - Annual Report) -Another Large Cap Watch List (Track at Marketocracy) member with dramatic positive earnings revisions, now standing at $2.71.
• Graco (GGG) is another Large Cap Watch List (Track at Marketocracy) member. Estimates have been coming down and are now at $0.61.
• MEMC Electronic Materials (WFR) - Is polysilicon supply catching up to demand for this Large Cap Watch List (Track at Marketocracy) member?
• Xerox (XRX) - can they make the numbers without asking investors to ignore a bunch of stuff? I don’t doubt they will earn $0.27 as expected but wonder how they’ll get there.

Thursday

• Federated Investors (FII) is on the Large Cap Watch List (Track at Marketocracy) and expected to earn $0.54.
• Ingram Micro (IM) is on the Small Cap Watch List (Track at Marketocracy) and expected to earn $0.36.
• KLA-Tencor (KLAC) - I know the semiconductor equipment fundamentals stink. I want to know how much and whether it is priced in.
• NII Holdings (NIHD) is on the Large Cap Watch List (Track at Marketocracy) and expected to earn $0.49.
• Western Digital (WDC) is on the Large Cap Watch List (Track at Marketocracy) and expected to earn $0.36.

Disclosure: William Trent has a long position in SMH.

My watch lists did not perform as well as the benchmarks this week. The Small Cap Watch List (Track at Marketocracy) lost 2.54%, compared with losses of 2.25% for the Russell 2000 and 1.59% for the S&P Small Cap 600.

The Mid Cap Watch List (Track at Marketocracy) lost 1.96%, compared with 1.32% for the S&P Midcap 400.

The Large Cap Watch List (Track at Marketocracy) lost 1.43% while the S&P 500 lost just 1.19%. At least it is still doing better since inception.

The economic data last week continued the prior trend - mixed with a skew to the weak side.

EconomicData

May durable goods orders fall, stir growth fears - Yahoo! News

New orders for long-lasting U.S.-made manufactured goods tumbled a larger-than-expected 2.8 percent in May, raising doubts about the strength of the factory sector and business expansion plans.
It was the first drop in durable goods orders since January and followed a 1.1 percent rise in April, the Commerce Department said on Wednesday. Analysts were expecting orders to slip by only 1 percent.

Scary headlines aside, the report was indeed weak. Shipments and new orders for all durable goods barely showed positive growth over the last 12 months.

Still, in three of the last six months the shipments and order growth was negative. So, while this is a somewhat subjective classification, I included the durables report in the “bad but improving” column for my updated economic data table.

EconomicData

One area that seems to be gathering steam is computers. Shipments and orders both appear to be recovering.

Other than that, many of the other industries were exhibiting patterns similar to that of overall durable goods - weak, with growth down significantly over the last 6-12 months, but with signs of a possible improvement in the last couple of months.