Market Overview

Factory Orders Fall Less than Expected

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Factor Orders for the month of March were released this morning. New orders were down 1.5 percent month-over-month, better than the 1.7 percent decrease anticipated by analysts; however, lower than the revised February increase of 1.1 percent.

From the release by the US Census Bureau, “New orders for manufactured goods in March, down two of the last three months, decreased $7.1 billion or 1.5 percent to $460.5 billion, the U.S. Census Bureau reported today. This followed a 1.1 percent February increase. Excluding transportation, new orders increased slightly.”

“Shipments, up ten consecutive months, increased $3.3 billion or 0.7 percent to $466.2 billion. This followed a 0.1 percent February increase.”

“Unfilled orders, up twenty-three of the last twenty-four months, increased $0.5 billion or 0.1 percent to $930.6 billion. This followed a 1.2 percent February increase. The unfilled orders-to-shipments ratio was 6.17, down from 6.24 in February.”

“Inventories, up twenty-nine of the last thirty months, increased $1.9 billion or 0.3 percent to $618.4 billion. This was at the highest level since the series was first published on a NAICS basis in 1992 and followed a 0.3 percent February increase. The inventories-to-shipments ratio was 1.33, unchanged from February.”

Factory Orders measures the overall change in the value of new purchase orders placed with manufacturers. This survey provides data on manufacturers' value of shipments, new orders, end-of-month order backlog, end-of-month total inventory, and inventories by stage of fabrication.

A higher than expected reading is generally bullish for U.S. equity markets as it shows demand across the manufacturing sector, while a lower than expected reading usually is taken as bearish for U.S. equities.


ACTION ITEMS:

Bullish:
Traders who believe that Factory Orders is a leading indicator for the US economy, you might want to consider the following trades:
  • If the indicator comes in better than expected, long general industrial companies like Illinois Tool Works (NYSE: ITW) or Caterpillar (NYSE: CAT) as these companies will benefit for increasing factory orders.
  • Also, long appliance-makers like Whirlpool (NYSE: WHR).
Bearish:
Traders who do not believe that Factory Orders is a leading indicator for the general US economy, you may consider alternative positions:
  • If the indicator comes is worse than expected, long Consumer Staple companies like Procter & Gamble (NYSE: PG) and Colgate (NYSE: CL) because even if the economy is struggling, people still need to buy staple products like shampoo and toothpaste.
  • Also, short building companies like Toll Brothers (NYSE: TOL) if the manufacturing trend is worse-than-expected.
Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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