Durable goods orders' stunning 13.2% dive in August was largely due to the volatile transportation sector, but Thursday's report revealed a broad decline in business demand and investment as "fiscal cliff" concerns mount.
Aerospace giant Boeing (BA) hit a temporary lull in orders, wiping out commercial aircraft demand last month. Autos fell 10.9%, the Commerce Department said.
But even excluding transportation, orders fell 1.6%, the sixth retreat in eight months. The dollar value was the lowest since April 2011.
U.S. stock indexes rallied sharply anyway on hopes that China will announce more stimulus and that Spain's new budget will lead to a crisis-easing sovereign bailout. Spain-related fears had hit equities in the prior two days.
Steep tax hikes and spending curbs are set to kick in at year-end, if lawmakers fail to reach a deal moderating them, making companies reluctant to invest until the uncertainty is lifted.
The fiscal cliff contributed to confidence among major CEOs tumbling to a three-year low. Defense contractors like Lockheed Martin (LMT) have warned of thousands of layoffs, if additional Pentagon cuts go into effect.
Last month, defense capital goods orders plunged 40.1%, after declining by nearly 15% in July. They are now at the lowest level since December.
A sluggish global economy and European debt crisis fears have also been head winds on U.S. firms, which pulled back on a wide array of durable goods last month.
Orders were down 4.7% for machinery, 3.4% for computers and electronics, and 1.7% for primary metals. Unfilled orders, an indicator of future demand, fell 1.7%.
"Uncertainty is high," said Michael Hanson, senior U.S. economist at Bank of America Merrill Lynch. "There's a number of factors, the fiscal cliff being one of them.
On the positive side, orders for electrical equipment rose 3.8%. Core capital goods orders, which exclude aircraft and defense, grew 1.1%. But that's a meager rebound from July's 17-month low.
Durable-goods data for September could see an improvement, if firms reacted positively to the Federal Reserve's new monetary stimulus. A bond-buying plan the European Central Bank unveiled also calmed investors for most of this month.
Despite bleak orders books and gloomy CEO sentiment, the number of initial jobless claims fell by 26,000 to a two-month low of 359,000. The four-week average dropped by 4,500 to 374,000.
But that may reflect more on layoffs hitting record lows than a hiring pick-up. Payroll gains have been anemic. Three straight months of sub-100,000 job gains are another sign of corporate caution.
Q2 economic growth was revised to an annualized rate of 1.3% from the prior estimate of 1.7%, the Commerce Department said. GDP grew at a 2% pace in Q1 and 4.1% in Q4 2011.
The revision signals that the economy went into the second half of the year with little momentum, said Hanson, who sees GDP growth remaining at 1.3% in Q3.
"It doesn't feel like the fundamentals are particularly strong," he said.