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Factory orders rise 1.6%

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Today's factor orders data came in pretty much as expected, showing a 1.6% rise, as economists were looking for a 1.5% increase. Shipments of good increased by 2% in January. While factor orders grew in January, manufacturers continue to work down inventories as inventories fell 0.6% in January, marking the 12th consecutive month of inventory declines. Inventories of durable goods fell 0.6%, which is their lowest level since November 1997.

Today's data shows that inventory-to-sales ratio dropped to 1.33 from 1.37 in December, suggesting that inventories have been cut back just about as lean as can be feasible, without sales eventually leaving some without product to ship.

Last week's durable goods orders data that showed a 2.6% gain, was revised lower to a final durable goods order level of 2%. Much of the increase in durable goods orders was due to the 65.6% rise in defense aircraft orders and increases in other transportation goods, especially vehicles. Transportation orders rose 4.1% overall.

New orders for electronics rose 1.9% in January, including a 14.2% rise in semiconductors. Chip orders jumped 10.5% year- over-year. Computer orders gained 4.8%, helping boost the demand for many semiconductor-related products. Communications equipment orders rose 7.7% in January, but were still 39.1% below levels found in January of last year.

Dow Industrials posts triple-digit gain

Today's economic data has helped the Dow Industrials recoup the bulk of yesterday's losses and currently trades higher by 102 points at 10,536.

Gains in the Dow 30 are being led by J.P. Morgan Chase (NYSE:JPM) $33.81 +4%, Mc Donald's (NYSE:MCD) $28.50 +3.18%, Alcoa (NYSE:AA) +39.40 +2.5% and American Express (NYSE:AXP) $39.90 +2.15%.

Sector strength is found in the biotechs as the Biotech Index (BTK.X) jump 2.42%. While ImClone Systems (NASDAQ:IMCL) $28.87 +21.24% is not a component of the Biotechnology Index (BTK.X) or the Biotech HOLDRS (AMEX:BBH) the recent news that IMCL reached a new agreement with Bristol-Myers Squibb (NYSE:BMY) is adding a positive beat to the sector's trading. Sector gainers in the BTK.X are Millennium Pharmaceuticals (NASDAQ:MLNM) $21.48 +6.75% and Protein Design Labs (NASDAQ:PDLI) $16.93 +4.57%.

Jeff Bailey
Senior Market Technician
Option Investor

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