Wednesday, September 28, 2016

Durable Goods Orders — an important metric determining business spending and capital investment in general — were unchanged in August. This is better than the negative number analysts had been expecting, but less than what is expected to be needed to assist economic growth.

Strip out Transportation orders, we get -0.4%. Minus Defense, we’re at -1.0%. Without getting too deep into the weeds here, Non-Defense, Non-Aircraft Capital Orders reached +0.6%. This read helps focus on overall business investment growth without the major buys for things like airplanes, which are very expensive but don’t occur every month. And at +0.6%, we can see this growth remains slight.

OPEC Meeting Wraps Today

So it would appear that the ongoing two-day meeting between officials of the Organization of the Petroleum Exporting Countries (OPEC) will fail yet again to make meaningful reductions to oil output, thus failing to control the ongoing supply glut of oil on the global market. The organization’s next meeting is scheduled for late November.

The world’s largest oil producer, Saudi Arabia, offered to cut production by a half-million barrels per day, but experts say that’s about half of what the Saudis need to cut in order to make a dent in the glut. This is because accelerated supply from places like Iran and even oil tracking in the U.S. are keeping global oil supply high. The Saudis’ gambit going back several quarters was to continue production at high levels even with other sources coming online.

The Energy Information Administration (EIA) will release data on U.S. crude inventories a little later today, and analysts expect stockpiles to have risen, adding to the glut. That said, the WTI is up 0.9% thus far in the pre-market, and Brent crude is up 1.15%. Market futures overall are very modestly in positive territory at this hour, following decent gains in the S&P 500, Dow Jones and Nasdaq indices yesterday.

Mark Vickery
Senior Editor