Durable goods orders skyrocketed in March by a record-setting 9.2%. That increase was almost entirely driven by a significant increase in nondefense aircraft orders. The durable goods sector will be pleased with a solid upside surprise, representing a third consecutive positive month. The story is more complicated across other parts of the economy. On the non-defense side, aircraft orders took center stage with their dramatic ascendancy. By contrast, orders for core capital goods—excluding aircraft and defense—rose by a tepid 0.1%.
Taken together, the data paints a picture that yes, durable goods orders did shoot up, but the environment is pretty complicated right now. Despite the durable shipment’s drop off, equipment spending continued to remain strong in the first quarter of the year.
Durable Goods Orders Rise Sharply
March’s rise in durable goods orders adds some positive news amid mixed signals on the state of the economy. The reported 9.2% increase is due almost completely to a jump in orders for nondefense aircraft. This has been a critical sector for job demand, indicating that sectors reliant on the air travel industry are bouncing back from bigger COVID-era losses.
In many ways, analysts stated, this increase in orders is a reflection of current trends throughout the manufacturing and transportation industry. As the aviation industry continues to recover, manufacturers are meeting the rising demand, adding significantly to total orders in durable goods.
Underneath that very solid headline figure, core capital goods orders told a slightly less rosy story. Without the notoriously volatile aircraft and defense segments, these orders only increased 0.1%. This should suggest to us that industries are booming in some places and not in others.
Mixed Signals in Durable Shipments and Equipment Spending
Even as new durable goods orders skyrocketed, the non-receipt of these associated shipments plummeted over that same time. With the industry experiencing a serious downturn, it puts into perspective just how sustainable that growth in the sector has really been. Business equipment spending jumped during the first quarter. This shows that even when times are tough, businesses are still walking the walk when it comes to investing in the critical capital.
The worsening of the delta between orders and shipments illustrates some of the confusion that is characterizing today’s economic landscape. It’s not that companies aren’t winning orders—they are—but rather that they can’t deliver on them. Supply chain disruptions and other operational hurdles further complicate the process.
As companies and business organizations wrestle with these short- to medium-term challenges, it is uncertain whether this robust growth will yield lasting economic benefit.
Evolving Margin Requirements and Trading Dynamics
Durable goods recently have shown a remarkable turnaround. Additionally, the trading environment is undergoing significant changes, particularly in regards to margin requirements for equities. For some stocks, you need to maintain margin requirements. That’s at least $2,000 or 50% of the purchase price of the eligible securities you intend to buy on margin.
In such volatile markets, increased margin maintenance requirements are triggered based on the large fluctuations in intra-day trading. Whether it’s for internet, e-commerce, or other high-tech sectors, we’ve seen maintenance demands grow by as much as 70%. This amendment would merely bring the schedule up-to-date, given the increased risks involved in trading these stocks.
There are a number of structures operating within the trading ecosystem that can distort order execution. For example, with stop orders, when stock prices hit certain stop prices, the stop orders turn into market orders. Stop limit orders are more complicated. They change into limit orders once the order has reached its specified stop limit prices.
“1-800-TRADERS”
Essentially, market makers allow for faster trades and more efficiency on marketplaces such as NASDAQ. Today, more than 500 companies are actively conducting business in this sector. Their presence makes competitive pricing and liquidity possible in the market. In times of extreme volatility, also known as “fast markets,” live price quotes can deviate from the execution price in real time. This information gap can present significant obstacles for traders.