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Durable Goods Orders Jump in March

Zacks Equity Research

Initial Jobless Claims, which has us singing Beatles songs a week ago when the headline reached 50-year lows, jumped significantly for this past week: +37K to 230K new jobless claims. This goes back to where we had been consistently buoyed previous to these latest gouges in claims numbers over the past few weeks.

A range of 225K-250K jobless claims, even though it is out of the earlier 200K-225K range, is still consistent with a healthy labor market. Sub-200K, which we saw two weeks ago at 193K (upwardly revised from the initial read), is nothing short of phenomenal in our current environment. In short, don’t put much stock in a jump in jobless claims. Continuing Claims were steady at around 1.655 million — also an historically low figure.

Durable Goods Orders for March rebounded strongly, up 2.7% for the month, compared with expectations of +0.8%. This is also much stronger than the previous month’s -1.1%, which itself was a 50-basis-point jump from the initial read last month.

Strip out volatile Transportation costs and this number shears off quite a bit, but still solidly positive at +0.4%. A better look is in the non-Defense, ex-aircraft read, which is basically a proxy for business investment: +1.3%. And last month, the revision on this figure swung from -0.1% to +0.1%. Shipments for March were just -0.2%, indicating some inventory build on the business spending number, but overall we see strength in the near-term goods market.

Pre-market indexes remain decent ahead of the bell — except for the Dow, which looks to open down triple digits. One reason more than any other explains this: a terrible Q1 number from Dow component 3M MMM, the industrial conglomerate based in the Twin Cities area. 3M missed on both top and bottom lines, and not by a little: $2.23 per share was well below the $2.50 expected (and $2.50 in the year-ago quarter), and sales of $7.9 billion missed the $8.09 Zacks consensus, falling 5% year over year.

This marks 3M’s third miss in the past 10 quarters, but the company has only beaten estimates once in the past five. We see this manifesting itself in the company’s share price, now down 8% ahead of today’s opening bell, and significantly below the recent-era highs around $258 per share back in January 2018.

3M’s CEO Michael Roman has only been on the job nine months, so perhaps additional space should be given for his leadership to gain traction. But with outlook slashed — not to mention the Q1 earnings miss did not include a 72 cents-per-share write-down on litigation charges — it would seem he and the country he runs has a long way to go. 3M was a Zacks Rank #4 (Sell) prior to the earnings release.

After the closing bell, we look forward to new earnings results from Amazon AMZN, Ford F, Intel INTC and Starbucks SBUX, to name just a few.

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