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Stock Indexes Dip, But Economic Data Is Bullish Under The Hood | Stock News & Stock Market Analysis

U.S. stock indexes slipped midday Friday in the run-up to the three-day holiday weekend. Economic data, though, flashed bullish signals under the hood, even as some headline numbers disappointed.

XThe Nasdaq trimmed 0.2%, while the Dow Jones industrial average and the S&P 500 matched the loss. Small caps also stumbled 0.2% as the Russell 2000 headed toward a 1.1% gain for the week.

Volume in the stock market today was slow, which is typical around holidays.

Economic reports were more encouraging in the details than in the headlines.

For example, durable goods orders for November were weaker than expected, up 1.3% vs. views for 2%. However, a slew of data were revised sharply upward from the initial October reading. Ex transportation the October report was revised from 0.4% to 1.3%, according to Econoday. Core capital goods in October were revised from negative 0.5% to positive 0.8%.

Perhaps just as important, the year-over-year trend remains very strong: New orders in November surged 8.2%; ex transportation the growth was 7%; and core capital goods popped 8.1%.

The core capital goods numbers were especially good news. The increases suggest spending on equipment is picking up. During the Obama years, companies spent money buying back their own stock rather than launching capital projects in an iffy economic environment.

Another strong tidbit was consumer spending, which increased 0.6% in November vs. expectations for 0.5%. But the University of Michigan’s consumer sentiment gauge for December rolled in at 95.9 shy of the consensus view of 97.

Meanwhile, new home sales in November surged to 733,000, about 13% above the consensus number and 6% above the highest estimate in the range.

Most homebuilder stocks were quiet, but Meritage Homes (MTH) rose 1.5% in volume 12% above average. Meritage is bouncing off its 50-day moving average. This is the stock’s first trip to and bounce off the 50-day line since a late September breakout.

Blue chips were about evenly split between winners and losers for the day. IBM (IBM) was one of the better performers in the Dow Jones industrial average. Big Blue added 0.7%. The stock is about 16% off its high in February. IBM appears to be building a base but needs to build up the right side of the consolidation.

Although IBM has lost favor with Warren Buffett’s Berkshire Hathaway (BRKA), which has reduced its stake, that doesn’t constitute the full picture.

In Q3, 28 funds rated A+ bought shares vs. five A+ funds reducing exposure.

IBM is undergoing a business model transformation, shifting its focus to the cloud, and change has been slow.

Growth investors have little interest in the stock at this point, but the 4% dividend yield is attractive to income investors. Dividend increases are normally declared in April at IBM. If the company, lifts the dividend in April, the hike will represent the 23rd consecutive annual increase.

The Innovator IBD 50 Fund (FFTY), an exchange-traded fund that mirrors the IBD 50, slipped 0.7% midday Friday. The ETF is up 38% in 2017. The ETF, managed by Innovator Capital Management, made its debut on the NYSE in April 2015.

Among IBD’s 197 industry groups, biotechs, meat and oil led on the upside. Retail and steel took the day’s hardest hits.

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