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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wayners who wrote (4160)	6/26/2001 12:23:27 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

I'm not sure if Demand is picking up, but the durable goods numbers are a bit of a positive. It has shifted the Fed Funds contracts back to a small bias looking for a 25 basis point cut tomorrow. I think that 25 is what we may get as it should be reassuring to the long end of the bond market that future inflation will not heat up that quickly. This would expand the current price rally in the long end of the bond market, that started on 5-15 and 5-30. The Fed may also be realizing that it will take some time for the economy to correct it's excesses. ---------------------- Surprise broad-based gains make up the May durable goods orders report to leave a 2.9% gain way above expectations. The highlight may be the 35% surge in semiconductor orders given the frightening 40% April plunge. Transportation orders rose 3.4% and left a strong 2.7% rise ex-transportation. Motor vehicles provided some of the strength with a 7.4% increase as aircraft orders rose 2.9%. Capital goods orders rose 0.8% and nondefense capital goods rose 0.9%. While none of this argues that the downtrend has changed the surprise broad-based strength is a change and somewhat encouraging. May orders stand 21% below the July 2000 peak.

To: Wayners who wrote (4160)	6/26/2001 12:26:47 PM
From: John Pitera	Respond to of 33421

The Fed Fund futures contract is indicating a 64% chance of a 25 basis point cut by the Fed tomorrow. before the economic releases today, the chance of a 50 point cut was at 54%. For those who watch the funds futures prices for a perspective on policy expectations today's reverse is notable. From a probability of 54% yesterday for a 50 bp Fed ease tomorrow the July contract has fallen sharply this morning after the economic news to reduce the odds to just 36% while the 25 bp ease is assured. The futures contracts provide a reliable read on policy direction in the days prior to the FOMC announcement as the market swings in opinion between 25 bp and 50 bp.