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Durable Goods Show Tax Cuts Put to Corporate Use

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Friday, March 23, 2018

The markets dropped bigly yesterday on the announcement of U.S. tariffs on Chinese goods, with China responding, essentially, that it is not afraid of a trade war. The Dow, down 300 points in pre-market trading yesterday on the news that President Trump’s announcement was coming, fell to more than -700 points once the other shoe dropped. Clearly, the markets would have appreciated some other news.

So let’s give that to them: Durable Goods orders basically doubled expectations in its preliminary figures: +3.1% for the month of February, +2.5% ex-defense spending. Stripping out all transportation spending (aircraft, et. al.), this figure hits +1.2%, still double expectations. To give a little perspective, January reads for Durable Goods were -3.5% (revised) on the headline and -0.2% (revised) ex-transportation. Non-defense, ex-aircraft orders were +1.8% in February, again double expectations.

What do these numbers mean? Perhaps this is an indication that corporate tax cuts have made their way into equipment spending. (There doesn’t seem to be a run on refrigerators, so we can assume these beyond-expectation gains come from the enterprise side of spending.) With oil prices finally climbing above $60 per barrel for the first time in, literally, years, pipeline buildouts and similar hardware investments in the Oil & Gas sector, mining concerns, etc. appear to be where these gains have been made.

Dropbox IPO Drops Today

In other news, cloud-based services firm Dropbox brings its Initial Public Option (IPO) to the New York Stock Exchange (NYSE) today, under the ticker symbol DBX. The company has reportedly sold 36 million shares resulting in an $8.2 billion market cap, and it looks to debut at $21 per share. This is a tough day to bring a new stock to market, however, considering all the other static regarding trade wars and such. Currently, we do not see analyst reports on Dropbox, but once we do we will issue both a Zacks Rank (#1 to #5) as well as a Zacks Style Score (Value - Growth - Momentum).

It’s tough to think that this sort of thing will knock the main market concerns off today’s headline, however, and that is that newly issued tariffs look to have a meaningful impact on U.S. trade. Currently the Dow is -10% from its all-time highs posted January 26th, and the S&P 500 is -8% over the same time period. Both Asian and European markets were down overnight, although U.S. pre-markets are fluctuating around the zero mark at this hour.

Mark Vickery
Senior Editor

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