Durable Goods Drop 9.3% in June as Transportation Falls 22%; Core Orders Edge Up

Core Orders Surprise to the Upside, But Trend Remains Weak

Core durable goods orders—excluding transportation—posted a modest 0.2% gain, matching a downwardly revised 0.6% rise in May. Although slightly above expectations, the result reinforces a view that core manufacturing growth is tepid. Meanwhile, orders excluding defense spending fell 9.4%, pointing to waning demand from the private sector. These trends highlight cautious capital expenditure from businesses in a climate of elevated interest rates and tighter financial conditions.

Market Reactions and Rate Expectations in Focus

The softer headline figure has not significantly altered rate expectations. With inflation readings showing signs of stabilization, the Federal Reserve is expected to maintain its current policy stance. However, continued weakness in durable goods orders—particularly in transportation—could start influencing forward guidance, especially if business investment falters further. Bond yields were little changed following the report, while the dollar held steady, reflecting market consensus that the Fed will stay on hold for now.

Outlook: Bearish Near-Term Tone for Manufacturing Sector

The sharp drop in durable goods orders in June, especially in transportation, points to a bearish short-term outlook for the manufacturing sector. While core orders showed modest growth, the broader trend remains fragile. Unless transportation rebounds and private-sector demand strengthens, traders should anticipate further pressure on industrial stocks and manufacturing-related assets in the near term.