August durable orders fell 0.5% and orders excluding transportation fell 2.0%. Businesses are cutting back capital investment, and that should ripple throughout the economy. And, of course, housing is in a recession.

Today’s stock market reaction to this sobering news might reveal the actual underlying strength or weakness of this market. If the rally has been running on fumes, as we have been thinking, this news may be enough to turn the trend down. On the other hand, impressive market resilience could imply that the smart money is looking ahead to something unforeseeably great, although I cannot imagine what that might be, but never mind that.

Recession is good for bonds, so bonds’ upside push should be encouraged by the drop in durable orders.