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9/29/2011 9:57:47 PM
(By Rebecca Lipman. List compiled by Eben Esterhuizen, CFA)
Demand for US capital goods has climbed to the highest level in three months, suggesting business investments continue to support the recovery, reports Bloomberg.
Industrial goods are capital products or components produced primarily for the production other goods. The sector includes industries such as general building materials, waste management, cement, and aerospace and defense.
"Bookings for goods like computers and communications gear, excluding military hardware and aircraft, climbed 1.1 percent, the most since May," according to a Commerce Department report released today. "Demand for all durable goods dropped 0.1 percent, less than forecast . . . Bookings climbed 5.5 percent for computers last month, and increased 7.8 percent for communications gear."
Rising bookings seem to indicate that companies are proceeding to expand and continue with original investment intentions, despite the market volatility.
"The risk was always that the recent volatility would prompt a pullback among businesses. At the moment there are no signs of that happening in any meaningful way," said Neil Dutta, an economist at Bank of America, suggesting that the industry is on its way back to business as usual.
Industrial goods stocks were affected, like so many others, by concerns of market volatility, a possible double-dip recession and Europe's debt crisis. But this announcement has left investors feeling slightly more optimistic. "Economists at Barclays Capital Inc. and JPMorgan Chase & Co. were among those who raised their tracking estimate for third-quarter growth after the figures showed stronger investment and inventory building."
So, how have short sellers reacted to these signs of recovery? To find out we ran a search on industrial goods stocks with significant levels of short covering--meaning short sellers are exiting their positions because they believe prices may soon rise.
Short sellers seem to think the upside potential of these industrial goods stocks outweighs the downside potential--do you agree?
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