Today's Morning Coffee - Not So Durable Durables

Broad equity indices have started lower, outside of the NASDAQ, which is modestly higher. We have a burdensome couple of data days ahead of us, with the FOMC decision and revised GDP tomorrow, and personal income and spending, and consumer confidence to finish off the week. The market is unlikely to show too much enthusiasm before this news comes to pass, and the news could be disenchanting as well. Bulls can forward to the second quarter earnings season, which may again surpass analysts' low-ball estimates, and we think the market will begin to anticipate this in a week or so. The GDP revision is expected to be higher, and it will surface plenty of talk about a better Q2. Depending on the inflation data from the Friday report published by the Commerce Department, and the consumer sentiment report, we could swing widely in either direction Friday. Of course, the FOMC Statement Thursday could render Friday's data mute as well. Are you thoroughly enough confused yet? I think you see why stocks are mired in muck this week.

ECONOMIC DATA & ANALYSIS

Durable Goods Orders
May durable goods orders fell 2.8%, well short of the 1.5% slide expected (some sources showed consensus view for 1.0% decline). The number was significantly impacted by transportation equipment. Excluding transportation, orders were down only 1.0%. Still, the decreasing trend, if you can call it that yet, was impacted by housing and, surprisingly, business investment. This is what has the experts worried this morning. Business investment fell some 3%.

I agree with Steve Leisman, resident economist at CNBC, when he says the worst case scenario is that businesses are possibly sensing consumer softness, and investing less. I believe this is at least playing a minor role in the number. I also expect the housing reality has finally started home builders significantly reducing investment, and soon significantly consolidating. Home builders were living under illusion to start the year. When the builders really start consolidation, you may find your crescendo bottom buying opportunity in housing stocks, but I would focus on the best of the best when the time comes. I'm not talking about the best quality construction, but the best run companies, and that's likely Toll Brothers. Not yet though, but I'll tell you when. See, the Greek is not a perma-bear after all. I told you it was too early to look to housing in January, and I think it's still too early now, but I can sense bottom coming. Clearly though, some concerning things can happen to severely lengthen the time to true bottom, and I'm talking about Iran.

Conference Board's Consumer Confidence
The Conference Board's take on confidence was expected to fall to 105 in June, and we told you that number probably was not low enough in our article "The Greek's Week Ahead - Taxing Times." The figure came in at 103.9 and is a clear indicator, along with the Michigan survey, that the consumer is stressed. We should take this information seriously, as it has the potential to shake up most economists' forecasts for Q3 and Q4. We continue to expect downward revisions to these figures, despite a solid Q2 GDP report, which is widely expected.

FOMC
The FOMC begins its two-day meeting today, and the consensus expects it to result in no change to the benchmark interest rate. We expect some surprise though, as we anticipate there could be more than one dissenting vote. We anticipate the voting results, released later, will show a growing interest to raise interest rates in the future.

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