Meanwhile, the broad S&P 500 index in the U.S. crept closer to all-time highs first set back on April 2. This is a big relief rally, as U.S. equities are now up three days in a row. Much of this upward momentum was fueled by strong economic data. Perhaps most surprisingly, we did see an astounding jump in durable goods orders, countered by a small increase in initial jobless claims. As economic conditions evolve, key indicators suggest that the U.S. economy remains robust amid ongoing trade negotiations and geopolitical tensions.
On Thursday, the Commerce Department reported a 10.4% surge in new durable goods orders in August. This remarkable expansion was well above the expected 2% rise. This surprise increase paints a rosy picture; however, in particular, transportation and defense manufacturing is booming. At the same time, initial jobless claims in the U.S. rose modestly to 222,000, showing some cracks in this historic labor market. In a glimmer of positive news, continuing claims dropped to 1.841 million, surpassing market expectations and indicating that the job market remains solid.
Resilience in U.S. Industry
The good news from the recent economic data is the resilience of the U.S. industry and specifically, domestically anchored manufacturing and defense-sensitive segments. Analysts point out that even with the change dynamics under pressure from tariffs and global trade uncertainty, most industries are still strong. Governor Christopher Waller of the Federal Reserve spoke to these dynamics, saying,
“I’m not going to overreact to any tariff-induced inflation, but if we start seeing a serious rise in unemployment, I would expect more rate cuts, and sooner.” – Governor Christopher Waller
This admission shows the Fed’s unusually dovish but forward-looking stance in anticipating elevated future economic risks from tariffs.
Beyond building domestic resilience alone, the U.S. seeks to maintain its competitive edge globally. The tech war with China is escalating. It succeeds by addressing such complex issues as national security, digital sovereignty, economic leverage. As both nations move in tandem through these uncharted waters, the U.S. is obviously intent on holding on to its strategic advantages.
Trade Negotiations and Tariff Pressures
All the while, the prospect of additional U.S.-China trade negotiations are shifting. Now, President Trump himself has hinted that his administration might be willing to ease off on tariff pressure on China as negotiations continue. He added that his team is regularly talking to Beijing about trade issues. This is an important cue that shows the new administration’s willingness to push towards a solution.
As these negotiations continue in D.C., Europe is still making efforts to catch up on their own industrial policy. We’re seeing more dangerous signs of fragmentation in AI regulation and in chip funding as well. The contrast between the U.S. proactive stance and Europe’s hesitance may further highlight the U.S.’s competitive edge in key industries.
In the last few years these investment trends have changed. Investors have rotated out of U.S. tech stocks and into European markets, but unfortunately, the performance hasn’t been kind to those chasing high returns. Flea market On the other hand, the U.S. economy remains solid even after the first round of China tariffs. Current performance issues unambiguously sharpen this determination.
Economic Outlook
We know the economic landscape is shifting dramatically. There are many other important economic indicators currently closely watched by experts that may shape future Federal Reserve policy decisions. Core orders, excluding transportation, were flat at 0.0%, well under expectations. This shortfall in a time of strong economic demand should lead us to question the trends underlying this shortfall.
Even with the unexpected weakness, analysts are still tentatively upbeat on the broader economic picture. We have seen very positive durable goods orders, the return of a market with continuing claims going down. This stability would provide a tailwind for continued advance in U.S. equities.