LIVE MARKETS-Hump day data dump: Durable goods, industrial output, housing starts, mortgage demand

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HUMP DAY DATA DUMP: DURABLE GOODS, INDUSTRIAL OUTPUT, HOUSING STARTS, MORTGAGE DEMAND

A spate of generally upbeat economic data helped put a bounce in the step of investors on Wednesday, lending some tailwind to a strengthening stocks rally.

New orders for long-lasting, U.S.-made goods USGDN=ECI fell by 1.4% in December, not as steep as the 2.0% drop analysts expected and marking a pullback from November's 5.4% gain.

Commercial aircraft was the source of much of the weakness, while the U.S. military provided some muscle to the upside.

Drilling down into the Commerce Department's report - which covers everything from toaster ovens to attack drones - a 24.9% drop in new orders for commercial planes is the eye-catcher. Remove all transportation-related items, and new orders would have increased by 0.9%.

A 22.2% surge in defense-related capital goods helped ease the pain. Remove defense spending and new orders would have dropped 2.5%.

Communications and computer-related equipment rose by 2.0% and 3.0%, respectively, while cars/car parts rose by a solid 1.2%.

"The report paints a bullish backdrop for durable goods activity," writes Oren Klachkin, financial markets economist at Nationwide. "Looking ahead, spending gains should broaden in 2026, with AI still leading and other categories stepping up as policy tailwinds and lower uncertainty release delayed spending."

New orders for core capital goods - which excludes aircraft and defense items and is considered a barometer of U.S. corporate capex plans - posted a 0.6% gain, stronger than the 0.4% consensus, and standing on the shoulders of the prior month's upwardly revised 0.8% increase.

Next, industrial output USIP=ECI increased by 0.7% last month, according to the Federal Reserve.

That's more robust than the 0.3% gain economists predicted, and follows December's downwardly revised 0.2% gain.

Manufacturing output picked up steam, rising 0.6%, after the prior month's flat reading.

Beneath the surface, a 1.3% jump in motor vehicles/parts and a 2.1% surge in utilities output during a month marked by a bone-chilling cold snap that affected much of the country.

Capacity utilization USCAPU=ECI, a measure of economic slack, rose to 76.2%, shy of the 76.5% consensus.

Turning to the housing market, groundbreaking on new American homes USHST=ECI jumped by 6.2% in December to 1.404 million units at a seasonally adjusted, annualized rate (SAAR), according to the Commerce Department.

That's a significant 7.3% stronger than the 1.309 million units SAAR analysts were expecting and marks a decisive rebound from November's 4.2% drop.

Peeking under the hood, single-family projects - which account for the lion's share of the total - increased by 4.1%, while the starts in the volatile multiple-unit segment surged by 11.3%.

Building permits USBPE=ECI - considered one of the housing market's more forward-looking indicators - rose by 4.3% to 1.448 million units SAAR, beating consensus by 3.4%.

Here, a 1.7% drop in permits for single-family projects was offset by multiple-unit permits jumping 15.2%.

"Building permits were also stronger than expected, suggesting more momentum heading into 2026," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics. "We expect a gradual improvement in housing starts over the course of 2026."

Finally, the cost of financing home loans cooled down a smidge last week, prompting an increase in mortgage applications, according to the Mortgage Bankers Association (MBA).

MBA's average 30-year fixed contract rate USMG=ECI shed four basis points to 6.17%.

Even so, demand for loans to purchase homes USMGPI=ECI - among the housing market's leading indicators - dampened by 2.7%. But refi applications USMGR=ECI, which accounted for 57.4% of total mortgage activity, somehow enjoyed a 7.1% surge.

Taken together, total mortgage demand rose by 2.8%.

"Mortgage applications rose last week as the lowest rates in four weeks helped to revive some refinance activity," says Joel Kan, MBA’s deputy chief economist. "Treasury yields ended the week lower as weaker data on retail sales and home sales outweighed better-than-expected readings on the job market for January."

The 30-year fixed rate currently sits 76 basis points below where it was during the same week a year ago.

Over that same period, purchase applications have increased by 9.1%, while refi demand has spiked 131.8%.

(Stephen Culp)

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