Fed Meeting
The Federal Open Market Committee meeting is underway. Odds of a rate hike are now under 10%, after earlier uncertainty. No move on rates is expected across the two-day meeting. We do not say zero or 100%, but the chance of action is very low.
Fed Chair Kevin Warsh prefers short press conferences, cut to about half an hour. The conference tomorrow at 2:30 p.m. Eastern will likely be brief with little news. He will likely talk about task forces. He rarely gives an outlook and does not like to speculate; expect him to say it is appropriate to stand pat and stay matter-of-fact. Set expectations lower than normal.
Warsh has floated cutting the number of meetings from eight to six. This may have been one of the meetings skipped under that plan.
Durable Goods
Durable goods, one of the top six data points of the month, covers things you buy and keep more than 3 years, and is heavily transportation-driven. New orders rose 1.8% month over month, up from 0.0% a month ago, beating the 1.4% forecast. The number is volatile because a single aircraft order can swing it. Excluding transportation, orders rose 0.5%, below the 0.6% expected. Core capital goods rose 0.5%, below the 0.7% expected. A big beat on the headline, with the other two readings missing by one and two tenths.
The headline showed improvement from the prior month but missed the 2% estimate. The prior New York Empire State number was poor, matching a weak prior durable goods month; both improved this time. Trends across these series sometimes line up and tell the story.
Housing
Mortgage rates sit around 7.5%. Last week they eased for the first time in many weeks after a long climb. Home builder sentiment fell to its lowest level since 2012, so builders are not feeling invigorated.
Case-Shiller 20-city, month over month adjusted, rose 0.3%, in line with expectations and flat to a month ago. The 20-city unadjusted fell 0.4%, a miss of three tenths. Year-over-year came in at 2.7%, a tenth better than expected. The FHFA house price index rose 0.3% month over month and 2.4% year over year, slightly lower on the yearly figure.
Housing is in focus because higher interest rates and higher mortgage rates have frozen this part of the US economy. The Trump administration and Warsh are watching it closely.
Boeing (BA) Earnings
Boeing (BA) traded down about $3.50 pre-market after reporting earlier this morning. Net loss was 34 cents a share, worse than the 20 to 21 cents analysts expected. Revenue beat at $24.19 billion, up 3.9% year over year and above the roughly $24 billion expected.
Operating cash flow was $1.5 billion, up 33%. Free cash flow swung positive to $464 million, which matters for the balance sheet. The backlog hit a record $745 billion in orders. For the first time in a while, all 737 Max jets are certified.
Commercial airplane revenue slipped. Defense, space, and security revenue grew 15%. Global services delivered $1 billion in earnings at an 18.3% operating margin. The company still struggles in parts of the business and must deliver its backlog to lift free cash flow and strengthen the balance sheet. CEO Kelly Ortberg will likely comment through the day.
Over the last few months the stock is down: 15% over 3 months, 18% over 6 months. The 52-week high of $254 is far off. It remains a long road for Boeing.
