July 26, 2001

No Light at the End of the Tunnel

Today's durable goods report tells investors at large what we've warned you for months: There is no soft landing, so put on your crash helmets!

The huge drop in new durable-goods orders last month will further cripple company earnings.. Weak earnings have already hobbled most industries, especially the tech sector, and this just adds to the pain.

The decrease in new orders and shipments means that fewer businesses are investing in equipment or developing new products. Even Fed Chairman Alan Greenspan is concerned that less spending on new equipment will further delay any economic recovery.

So far this year orders are down 11.6%, and the 2% drop in June was twice what was expected. The fact that business spending fell this dramatically in one month clearly shows that the economy is not rebounding. And with consumer spending falling in tandem, we don't expect a turnaround for some time to come.

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