Strong Durable Goods Report Eases Concern Over the US Growth Outlook

US Stocks have rallied while oil pared most of its overnight sell off, after better-than-expected US economic data helped investors look past the worst day for Chinese stocks in a month.  Volatility in oil prices and concern over the state of China’s economy have set the tone for trading sentiment in recent weeks, but it appears some market participants may be refocusing on US fundamentals and the Fed.  A report out today showed orders for US durable goods rose 4.9% in January, more than offsetting a revised 4.6% decline in December.  The headline number was helped by a large jump in aircraft orders, but “core” capital goods, which exclude defense-related and aircraft orders, jumped by 3.9%, the best reading since June 2014.  The strong durable goods print is the latest sign that the US economy is holding up well in the face of global recessionary pressures.  A separate report showed the number of Americans filing for jobless benefits ticked up last week, but the trend remained below 300,000, consistent with a firming labor market.

The expected $28 billion 7-year auction was rescheduled until tomorrow due to technical difficulties, but the market has had Fed speakers (Lockhart and Williams) and heavier new corporate issues to digest.  Treasury yields and swap rates are both down 2-5 bps across the curve, while WTI crude is up nearly 3%.