Durables, Jobless Claims Ignored On Coronavirus Fears

Thursday, February 27, 2020

A slew of new economic data has been released ahead of today’s opening bell, of which normal times would dominate pre-market considerations. But these are not normal times; major market indexes at this hour are all pointed toward correction territory, with the Dow down 450 points, the Nasdaq off 190 and the S&P 500 -54.

The first revision to Q4 Gross Domestic Product (GDP) was equal to the first print: 2.1%. This was also in-line with analysts’ expectations. The ongoing trade war with the U.S. and China — remember that? — kept growth muted in the domestic market, with manufacturing going through a near-term recession. Consumption lost 10 basis points on the revision, as did the Price Index, to 1.7% and 1.3% respectively.

Still, 2.1% GDP will probably look very good in comparison to Q1 GDP when it comes out. Not just the havoc wrought by the global coronavirus knocking out travel, shipping, manufacturing and other industries, but Boeing’s (NYSE:BA) guidance on a delay in returning its beleaguered 737 MAX jet to the skies was already taking away basis points from Q1 GDP projections. Just this morning, Goldman Sachs (NYSE:GS) is calling for potential 0% GDP growth this quarter, depending on whether the coronavirus spreads get worse.

Initial Jobless Claims remained within its robust long-term range of 200K-225K, raising a bit from last week’s upwardly revised 211K to 219K. These weekly reads have stayed remarkably consistent over the past few years, illustrating our historically positive employment market in the U.S. Continuing Claims dipped from 1.733 million three weeks ago to 1.725 million the following week. These numbers are also consistent with a strong and steady domestic labor situation.

Durable Goods Orders for January came in better than expected, though still negative at -0.2% on the headline. But the previous month’s revision was boosted to a quite admirable +2.9%, half a percentage point above the initial December read. Ex-Transportation orders swung to +0.9% last month, while ex-Defense blossomed to +3.6%. This report’s proxy for business investment, known as Durable Goods, non-Defense, ex-Aircraft reached +1.1%, up from an upwardly revised +0.8% reported a month ago.

All this is well and good, but looking backward is taking a back seat to projections about a possible viral pandemic. Even in the United States, where infection levels of COVID-19 are relatively low, warnings from the CDC are such that a large increase in new cases is widely expected. Currently, 50 countries have reported cases of the coronavirus, with moving totals of 82K+ infections, more than 2800 worldwide deaths thus far, and over 33K recoveries have been counted.

Mark Vickery
Senior Editor

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