U.S. Factory Orders Exceed Analyst Expectations in January

Key Insights

• Factory Orders declined by 1.6% in January. 
• Factory Orders ex Transportation increased by 1.2%. 
• S&P 500 moved above the 4060 level, while U.S. Dollar Index tested new lows. 

Growth in Factory Orders Ex Transportation Surprises Analysts

On March 6, U.S. released Factory Orders report, which indicated that Factory Orders declined by 1.6% month-over-month in January, compared to analyst consensus of -1.8%.

Excluding Transportation, Factory Orders increased by 1.2%, while analysts expected that they would grow by 0.6%.

There is no clear trend in Factory Orders in recent months. Back in November 2022, Factory Orders declined by 1.9%. In December 2022, Factory Orders grew by 1.7%.

The higher-than-expected growth of Factory Orders ex Transportation  may be seen as a positive sign as Factory Orders ex Transportation have been declining in November and December. The dynamics of Factory Orders highlight the uncertainty regarding economic trends in the upcoming months.

The report should not have a material impact on the Fed policy outlook. According to the FedWatch Tool, traders expect that the federal funds rate will peak at 525-550 bps in 2023.

S&P 500 Tests New Highs After Factory Orders Report

S&P 500 moved above the 4060 level after the release of Factory Orders data. Traders focused on the growth of Factory Orders ex Transportation. The market sentiment remains bullish, and it looks that traders believe that the upcoming rate hikes from the Fed have been already priced in by the market.

U.S. Dollar Index tested new lows as demand for safe-haven assets declined. Treasury yields are moving lower, which is also bearish for the American currency.

Gold pulled back towards the $1850 level as traders took some profits off the table after the recent rebound. The Factory Orders data did not have a material impact on the dynamics of gold markets.

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