- Caterpillar benefits from solid Durable Goods Orders data on Monday.
- NASDAQ, growth stocks move lower on the good economic news.
- Dow Jones Industrial Average hits new all-time high.
- CAT stock looks likely to retest resistance zone in the $360s.
Caterpillar (CAT) is moving higher on Monday in sharp contrast to the wider market. The NASDAQ and S&P 500 sold off on Monday morning, while Caterpillar and a number of other Dow Jones index stocks gained ground. The Dow, in fact, reached yet another all-time high at 41,420 on Monday, following last week's decent Dow performance.
US Durable Goods Orders surprised to the upside on Monday as July orders of $289.6 billion rose nearly 10% above the June figure and outperformed the consensus of 4%.
It’s the last week of major second-quarter earnings, and many traders are tightly focused but nervous about Nvidia’s (NVDA) results come Wednesday. However, the likes of Lululemon (LULU), CrowdStrike (CRWD), Dell Technologies (DELL), Ulta Beauty (ULTA), Salesforce (CRM), Dollar General (DG) and Marvell Technology (MRVL) will also turn heads in the final week of the summer.
Caterpillar stock news
The Durable Goods Orders data helped Caterpillar despite persuading tech stocks to sell off. The basic premise is that better economic data makes it less likely that the Federal Reserve (Fed) will cut interest rates at a faster rate.
Fed Chair Jerome Powell all but promised a cut at the September meeting last week during his Jackson Hole speech, so the market is simply debating whether the first cut will be 50 bps or 25 bps. Since tech stocks are more reliant on interest rates for their valuations, this news is startling growth stocks, while industrials like Caterpillar who sell durable goods look more attractive.
This latest data confirms last week’s announcement from the Equipment Leasing & Finance Association that US corporations increased their borrowing to purchase equipment by 14% YoY in July.
The Monthly Confidence Index for the Equipment Finance Industry rose from 50.7 in July to 58.4 in August, which was the highest level since February 2022.
"We’re expecting economic conditions for businesses to improve over the next six months as interest rates decline and investment in US manufacturing continues to grow, which in turn will lead to rising demand for funding to complete capex projects,” said Jeff Elliott, president of Huntington Equipment Finance, in a statement that accompanied the data.
It seems hedge funds were ahead of the news this time as Bank of America Securities noted recently that while keeping their active equity positions roughly the same in July, long-only funds cut investments in tech and consumer discretionary to plough more than $30 billion into industrials that month.
Caterpillar stock chart
Caterpillar stock is trading inside a widening wedge pattern, which may worry some traders from joining the current rally that has taken place since August 5. Now back above the 50-day Simple Moving Average (SMA), the high momentum observed in the rising Relative Strength Index (RSI) makes it likely that bulls will stage a retest of the overhead supply zone spanning $362 to $369. This region ended recoveries in April, May and July.
Bulls may need to see the 50-day SMA overtake the 100-day SMA, which is one bearish sign on the current daily chart.
On the downside, the 200-day SMA is rising near $322, while the descending lower trendline moves toward the $300 psychological level. Both levels will be looked to for support.
CAT daily stock chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stays vulnerable near 1.0600 ahead of US inflation data
EUR/USD remains under pressure near 1.0600 in European trading on Wednesday. The pair faces headwinds from the recent US Dollar upsurge, Germany's political instability and a cautiou market mood, as traders look to US CPI data and Fedspeak for fresh directives.
GBP/USD trades with caution near 1.2750, awaits BoE Mann, US CPI
GBP/USD trades with caution near 1.2750 in the European session on Wednesday, holding its losing streak. Traders turn risk-averse and refrain from placing fresh bets on the pair ahead of BoE policymaker Mann's speech and US CPI data.
Gold price trims a part of modest recovery, focus remains on US CPI
Gold price (XAU/USD) trims a part of modest intraday recovery gains, albeit it manages to hold above the $2,600 mark heading into the European session on Wednesday. Traders now look forward to the crucial US consumer inflation figures for a fresh impetus.
US CPI data preview: Inflation expected to rebound for first time in seven months
The US Consumer Price Index is set to rise 2.6% YoY in October, faster than September’s 2.4% increase. Annual core CPI inflation is expected to remain at 3.3% in October. The inflation data could significantly impact the market’s pricing of the Fed’s interest rate outlook and the US Dollar value.
Five fundamentals: Fallout from the US election, inflation, and a timely speech from Powell stand out Premium
What a week – the US election lived up to their hype, at least when it comes to market volatility. There is no time to rest, with politics, geopolitics, and economic data promising more volatility ahead.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.