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Durable goods fall 1.2% in February

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Stock futures have pulled back from their best levels of the morning that saw the S&P 500 June futures contract (sp03m) trade at 875, but now slip to unchanged at 872.20 after the Commerce Department reported that orders for durable goods fell 1.2% in February, as demand for computers, electronics, metals, aircraft and cars declined. Shipments of durable goods also declined in February by 1.6%.

Economists had forecasted a 1.5% decline in durable goods orders, so February's report, while weak, was slightly above forecast.

January's orders were revised lower, now showing a 1.9% gain not the 2.9% gain first reported.

Durable goods orders were 1.4% above those placed in the same month a year ago.

Orders excluding transportation fell 2.1% in February after rising for two months. Orders ex-defense slumped 2.7%, wiping out January's 2.2% gain.

In the key non-defense capital goods sector, considered a good read on business investment. orders slumped 5.2%.

Orders for commercial aircraft dropped some 26% in February. Accordingly, non-defense capital goods orders outside of those for commercial aircraft fell a slightly tamer 2.8%.

Only military spending for the war effort pushed up orders in select categories; defense aircraft orders rose 6.7%, while defense capital goods orders surged 28% for the month.

Orders for computers fell more than 12% and for communications equipment were down over 4%. Machinery orders fell 2.5%, while metals were down more than 2%. Electrical components and equipment eased 1.9%.

We've seen a modestly negative reaction from the markets after this morning's release of economic data and find S&P futures (sp03m) now down 0.80 points at 871.50. NASDAQ futures (nd03m) are gaining 1 point at 1,066.50, while Dow futures (dj03m) are lower by 2 points at 8,240.

Fair value for the S&P 500 today is $-0.84. That price will not change for the session. When compared to the morning S&P futures trade, we're currently looking at a flat open for equities. HL Camp & Company has their computers set for program buying at $0.38 and set for program selling at $-2.68. Fair value for the NASDAQ-100 today is $3.37.

While equities look to open flat, Treasuries are currently flat or seeing modest gains. The 5-year June futures contract (fv03m) $112'170 +0.03% are gaining '015, while the 10-year Treasury futures contract (ty03m) $113'175 are unchanged. The longer- dated 30-year futures contract (us03m) $111'05 +0.08% are gaining 3/32. This action is interpreted by me as modestly defensive and most likely has bond traders monitoring this morning's stock open closely.

After writing last night's Index Trader Wrap, I was looking at some of the various charts we will show over the course of a week. One chart not discussed was the Dow Industrials (INDU) with conventional retracement overlaid that was taken from the October lows to December high. A level of RESISTANCE that really came into play during yesterday's trading was the 38.2% retracement of 8,338.24. As such, I would NOT look to add any bullish positions in this index at current levels, but would look instead for pullback entry points near 8,050 as discussed in last night's Index Trader Wrap at OptionInvestor.com.

Jeff Bailey

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