Durable Goods Orders in the US decreased by 9.3% in June, amounting to $32.1 billion, reaching a total of $311.8 billion. This decrease was better than the expected 10.8% drop and followed a revised 16.5% increase in May.
Excluding transportation, new orders did not change, while excluding defence, they fell by 9.4%. The downturn was driven by transportation equipment, which decreased by $32.6 billion or 22.4%, bringing it down to $113.0 billion.
Market Reactions
Following the report, the US Dollar Index maintained a positive trend, trading near 97.80 with a daily increase of 0.3%.
We see the headline 9.3% drop in durable goods as a signal of volatility, not a sign of a collapsing economy. The figure was significantly better than what markets had priced in. The most important detail is that new orders were flat when you exclude the volatile transportation sector.
That 22.4% plunge in transportation is where traders should focus their attention for opportunities in market variance. Historically, massive orders from events like the Paris Air Show can create a surge one month, leading to a sharp, predictable drop the next. This suggests looking at options on major aerospace and defense companies like Boeing or RTX Corporation for short-term plays.
Investment Strategies
The US Dollar’s strength following the report confirms that the market is looking past the headline number. The stability in the core data reduces the immediate pressure on the Federal Reserve to take drastic action. We believe strategies that benefit from a steady or slightly stronger dollar, such as call options on the Invesco DB US Dollar Index Bullish Fund (UUP), are prudent.
To make this view more credible, we look at the most recent data from the Census Bureau, released May 24, 2024. It showed durable goods orders in April actually increased by 0.7%, continuing a trend of beating expectations. This pattern reinforces the idea that the underlying business climate is firm, despite monthly noise.
This recent strength, especially the 0.3% rise in non-defense capital goods orders excluding aircraft, points to continued business investment. This metric is a key proxy for business spending plans and its health supports a positive outlook for industrial sector ETFs like XLI. We would position for continued, steady growth rather than a sharp downturn.
