Durable Goods Beat Expectations

by on June 25, 2013 | ETFs Mentioned:

Stocks kicked off today’s session with a rally thanks to encouraging economic data coming in from around the world. China’s stocks bounced last night after a rough 24 hours of trading, and gains by financials and energy sectors lead the charge in the U.S., but the unanticipated growth in durable goods orders pushed returns back up [see The Best Dividend ETF For Every Investment Objective].

May Durable Goods Better-Than-Expected

The orders for US Durable Goods beat forecaster expectations in May, a month where investors usually see loses, to gain 3.6% overall. Median forecasts were hovering around 3% before the reporting, but this bump is great news for industrials, transportation and manufacturing sectors going into the summer. Overall orders were largely bolstered by Boeing’s outstanding month, including over 230 additional aircraft orders, up from just 51 orders placed in April [see also 5 Reasons Not to Flee Non-US Dividend Stocks].

Industrials ETFs Performance Recap

This strong data coming in for May has led many analysts to reconsider expectations for the rest of the year, hoping that the orders coming in now will mean strong revenue later; consider the performance of the largest ETF in this sector, the Industrial Select Sector SPDR (XLI, A), versus the broad U.S. market as represented by SPY:

XLI - Exchange Traded Funds - ETF Price Chart for Industrial Select Sector SPDR

Click to Enlarge

XLI returns are almost exactly in line with the U.S. market over the last six months, really only losing steam in April while orders were down. The ETF has gained just over 10% since the start of 2013 and expectations are high for this ETF’s steady growth to continue into the fall. With a 2.05% dividend yield, XLI also appeals to investors looking for current income along with fund growth.

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Disclosure: No positions at time of writing.