Introduction
On May 23, 2025, investor optimism took a hit after the latest report from the U.S. Census Bureau revealed that durable goods orders for April came in below expectations, renewing fears about the underlying strength of U.S. economic growth. With markets still digesting hawkish signals from the Federal Reserve earlier in the week, today’s weaker data shifted sentiment back toward caution.
Durable goods orders declined 0.9% month-over-month, missing the consensus forecast of -0.3%. Excluding transportation, new orders were flat, suggesting softness beyond volatile aircraft and defense sectors. Equity markets pulled back modestly, bond yields edged lower, and defensive sectors outperformed.
Headline and Core Figures
- Headline durable goods orders (April): -0.9% vs. -0.3% expected
- Ex-transportation orders: 0.0% vs. +0.3% expected
- Capital goods orders non-defense ex-aircraft (proxy for business investment): -0.4%
The disappointing core figure raised concerns about the health of corporate spending, particularly in manufacturing and industrial equipment.
Market Reaction
Equities Retreat
- S&P 500: -0.5% to 5,238
- Dow Jones Industrial Average: -0.6% to 38,120
- Nasdaq Composite: -0.3% to 15,808
Industrials and materials led the decline:
- Caterpillar (CAT): -2.1%
- 3M (MMM): -1.9%
- Deere & Co. (DE): -1.8%
Defensive Sectors Advance
Investors rotated into staples and healthcare:
- Procter & Gamble (PG): +0.5%
- Johnson & Johnson (JNJ): +0.4%
- PepsiCo (PEP): +0.3%
Fixed Income: Yields Slip
Bond yields dipped as economic growth concerns returned:
- 10-year Treasury yield: down 5 bps to 4.51%
- 2-year yield: down 3 bps to 4.59%
The move reflects expectations that weaker data could eventually lead to Fed moderation, even as short-term rate cut bets remain suppressed.
Fed Watch
While officials stayed quiet ahead of the Memorial Day weekend, markets interpreted today’s print as potential evidence of slowing momentum that could influence FOMC deliberations by summer.
- CME FedWatch Tool: September rate cut odds ticked up to 45%
Commodities and Dollar Movement
- WTI crude: -0.6% to $96.23/barrel
- Brent crude: -0.4% to $99.72/barrel
- Gold: +0.5% to $2,397/oz as safe-haven demand picked up
The U.S. dollar edged slightly lower:
- DXY: -0.3% to 103.3
- EUR/USD: +0.2% to 1.090
Cryptocurrency Movement
- Bitcoin (BTC): -1.2% to $104,950
- Ethereum (ETH): -1.5% to $3,345
Crypto pulled back as risk sentiment faded and some traders took profits after a strong tech-led rally earlier in the week.
Analyst Commentary
- Bank of America: “Today’s durable goods data is the first crack in the growth narrative since March.”
- Citigroup: “It’s too early to call a downturn, but capital spending trends are worth watching closely.”
- Wells Fargo: “The Fed will take note of this softness, but it won’t pivot policy until inflation moves further.”
Global Reaction
- FTSE 100: -0.4%
- DAX (Germany): -0.5%
- Nikkei 225: -0.6%
- Shanghai Composite: +0.2%
Emerging market equities also declined as U.S. growth jitters spread globally.
Portfolio Strategy Implications
- Equities: Consider rotating into defensive sectors and dividend payers
- Fixed Income: Short duration bonds still preferred, but cracks could open duration opportunities
- Commodities and Alternatives: Reassess gold and cash hedges amid data weakness
Conclusion
May 23’s durable goods miss served as a wake-up call to markets riding high on AI-fueled optimism and resilient earnings. While the data may not yet signal recession, it raises doubts about the sustainability of business investment amid high interest rates and geopolitical uncertainty.
As the Fed weighs incoming data and the economy shows mixed signals, investors may face a more volatile summer. Today’s report underscores the importance of diversification, defensive positioning, and disciplined risk management in an environment where cracks in the growth story are starting to show.
