Instant View: Durables orders disappoint in July

NEW YORK (Reuters) - New orders for U.S. durable goods fell short of expectations in July and, excluding transportation equipment, posted their largest decline in 1-1/2 years, pointing to a slowdown in manufacturing.

KEY POINTS: * The Commerce Department said durable goods orders rose 0.3 percent after a revised 0.1 percent fall in June. Excluding transportation, orders dropped 3.8 percent -- the biggest fall since January 2009 -- after rising 0.2 percent in June. * Analysts polled by Reuters had forecast orders increasing 2.8 percent last month from June's previously reported 1.2 percent fall. Orders excluding transportation had been forecast to increase 0.5 percent from a previously reported 0.9 percent fall.

COMMENTS:

RONALD LEVEN, SENIOR CURRENCY STRATEGIST, MORGAN STANLEY, NEW YORK:

"The dollar is off a bit on the durable goods number, but the news didn't have a dramatic impact on the market. It is just a growing evidence that the economy is not performing well. The reaction to the number is mixed. The number was bad for the dollar, but the stock market is trading poorly, which is dollar supportive. Emerging markets currencies are going to struggle today and the dollar is very likely to stay very heavy against the yen. While it's hard to say where the euro is going, it might track equities performance. It seems to trade weak among the G10 currencies, but not with EM currencies."

JOSEPH BATTIPAGLIA, MARKET STRATEGIST, STIFEL NICOLAUS, YARDLEY, PENNSYLVANIA:

These numbers are "not surprising since we've seen previous data that suggested a negative print, which again reinforces the notion that (cutting) out stimulus, (cutting) out inventories, there's nothing there and consequently the U.S. economy is sliding back into recession.

"All you've got on the other side is the promise of more quantitative easing and more talk on Capitol Hill about more attempts to stimulate the economy. Outside of that the private sector is still in contraction. This economy never came out of recession quite frankly.

"We may well touch the previous lows from earlier this year (on the S&P 500) and I think earnings expectations have to be materially reduced."

PETER CARDILLO, CHIEF MARKET ECONOMIST, AVALON PARTNERS, NEW YORK:

"This is certainly negative in terms of economic activity, but we are still waiting for the 'real number' today which is the new home sales. If we get a weaker number there, that will further trigger an erosion in the market technicals and poise the averages to retest their year lows.

"I personally think we'll escape the double recession scenario but the bond market certainly seems to be convinced of

that (double dip). If that continues, then there will be an increasing bearish sentiment and bears will be in full control."

MARK VITNER, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA:

"We really hone in on the ex-transportation, ex-defense and there was a whole lot more weakness there than just about anybody expected. The shipments are also down, and I think this is going to cause a lot of economists to ratchet down their expectations for second-half economic growth even more. Quite frankly, I think that this number is going to prompt a lot of talk about the economy having fallen in to another recession. Not the risk of falling into another recession but having already fallen into another recession."

"It comes on the heels of some very weak numbers from regional Federal Reserve banks. I think that right now it is too soon to make that call, that we have fallen back into another recession, but this is the type of number that you see in a recession -- not just the July figures but the revisions and the underlying trend that we have seen the last few months.

"What we believe is happening is the economy is simply adjusting to the winding down of some of the stimulus programs and the ending of the inventory rebuilding, and that we will see growth slow to around 1.5 percent and we won't actually fall into a recession. But I am very concerned that it might turn out to be worse than our base case."

CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK:

"They are obviously lousy. It's very disappointing. The strength of second quarter GDP was business spending. It looks like businesses are pulling back from this commitment in a very big way in July. It's an indication of how sentiment is deteriorating.

"The orders number is a big deal. We are still looking at some growth in investment spending. My GDP forecast before morning was 2.0 percent and now I'm thinking of taking it down to 1.0 to 1.5 percent. We have some real weakness to contend with in the ex-transportation sectors. I don't have a double-dip in my forecast because I don't have a contraction in consumer spending."

MATTHEW STRAUSS, SENIOR CURRENCY STRATEGIST, RBC CAPITAL MARKETS, TORONTO:

"A big disappointment, especially the ex-transportation component, which was a big miss. It adds to the slew of softer-than-expected data coming out of the U.S., increasing the risk of a very gradual recovery going forward. I think we're not yet looking at double-dip as a base case scenario, but clearly the risk of entering into a period of very, very sluggish growth has risen. This number adds to that risk."

MARKET REACTION: STOCKS: U.S. stock index futures fell. BONDS: U.S. Treasury debt prices rallied. DOLLAR: U.S. dollar fell against the yen and Swiss franc.