A trio of reports released on Wednesday confirmed the economy’s resilience, reducing the odds of near-term rate cuts. Bond prices fell as traders baked in a hawkish interest rate environment, while equities also advanced.
Durable goods orders: New orders for manufactured durable goods fell 1.4% month-over-month (MoM) in December, according to a delayed preliminary report released by the U.S. Census Bureau. Economists, on average, were bracing for a 1.8% drop following a 5.4% jump in November.
Source: Census Bureau
The key inner details are as follows:
- Transportation equipment orders served as a drag, dropping 5.3% following a 15.2% jump in the previous month.
- Stripping transportation, durable goods orders rose 0.9% versus the 0.3% consensus.
- Non-defense capital goods orders, excluding aircraft, were up 0.6%, slower than November’s 0.8% growth, but exceeding the consensus estimate for a 0.5% increase. This metric, called core capital goods, is a measure of business demand for equipment and machinery.
Commenting on the report, Saffron Capital’s Brad Horn said, “Traders should read this as rotation, not recession. Aircraft noise distorted the headline. Under the hood, corporate spending plans remain intact.”
Housing Starts: Privately-owned housing starts rose 6.2% MoM but fell 7.3% year over year (YoY) to a seasonally adjusted annual rate of 1.404 million units. The headline number exceeded expectations of 1.31 million units. Single-family housing starts rose 4.1% MoM to 981,000.
Building permits, considered a leading indicator of housing starts, came in at a seasonally adjusted annual rate of 1.448 million units, up 4.3% MoM, although declining 2.2% from the year-ago period. Economists, on average, however, expected a more modest increase to 1.400 million units.
Industrial Production: A Federal Reserve report showed that industrial output climbed 0.7% MoM in December. Manufacturing production, accounting for roughly three-fourths of the industrial output, rose 0.6%, marking the biggest increase since Feb. 2025. Utility output climbed 2.1%, while mining output edged down 0.2%. Economists, on average, expected industrial and manufacturing production to increase 0.4% apiece.
Capacity utilization came in at 76.2%, about 3.2 percentage points below the long-run average.
ES Futures Stutters But Recovers: The E-Mini S&P 500 futures (ES), which is trading off its all-time intraday high of 7,043 reached on Jan. 28, gave back some of their early gains. The derivative instrument has since then picked up strong momentum as artificial intelligence (AI) fears, which dented risk appetite in recent sessions, faded.
The rally has lifted the E-mini S&P 500 futures (ES) above its Volume Weighted Average Price (VWAP), signaling a potential shift in intraday control toward bulls. VWAP is widely viewed as a fair-value benchmark, and a sustained move above it suggests buyers are willing to pay a premium, reinforcing upside momentum. On the downside, the 6,814 level remains a key support zone, where dip-buying interest could re-emerge.
Source: TradingView
Next up would be the minutes of the Federal Open Market Committee meeting, which is due at 2 p.m. ET. The minutes of the meeting in which the Fed stood pat, could give more clarity on the thinking of the central bank officials regarding the interest rate trajectory.
