Good news today ahead of an afternoon policy statement from the Federal Reserve. The good news came early on with durable goods orders (orders for big-ticket items) increasing 1.8% in May, the same as in April. Expectations were for a drop of 0.9% in the recent month. This is more evidence of "green shoots" of a slow economic recovery currently in place…
A gauge of capital spending in the report also jumped. Orders for non-defense capital goods excluding aircraft rose by 4.8%, after decreasing 2.9% in April. It was the largest increase since 8.2% in September 2004.
Another optimistic sign on business spending came from Oracle. The software maker beat estimates and issued better-than-expected guidance. Oracle's outlook boosted other tech companies that cater to business clients.
Also out today was news on new home sales. The Commerce Department said today that sales dropped 0.6 percent in May to a seasonally adjusted annual rate of 342,000, from a downwardly revised April rate of 344,000. Sales were down nearly 33 percent from May last year.
The results fell short of economists' forecast of a 360,000 sales pace, according to Thomson Reuters. However, many analysts think new home sales hit bottom in January and will increase gradually as the economy gathers steam.
The good news was the median sales price of $221,600 was up 4.2 percent from April, but still down 3.4 percent from a year ago.
There were 292,000 new homes for sale at the end of May, down more than 2 percent from April. At the current rate of sales, that's a 10-month supply. The inventory of homes for sale "will remain enormous, particularly with increased competition coming from distressed sales of existing homes," wrote Joshua Shapiro, chief economist with MFR Inc.
The Fed is due to wrap up a two-day meeting and release a policy statement at 2:15 p.m. EDT. The central bank is expected to leave interest rates unchanged and is unlikely to announce any other major changes in policy, though traders will be watching for any changes in the Fed's economic outlook or signals that it's beginning to consider an exit strategy from its quantitative-easing program.
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