3 Reasons Markets Were Up on Durable Goods while Gold Prices Crashed

Markets closed up on Wall Street today: Dow +1.28%, S&P +1.31%, Nasdaq +0.88%, Oil -0.40%, Gold -5.07%.

On the commodities front, Oil (NYSE:USO) fell to $85.10 a barrel. Precious metals were also down, with Gold (NYSE:GLD) falling to $1,766.90 an ounce and Silver (NYSE:SLV) falling 5.76% to $39.89 an ounce.

Hot News: Sprint Challenges Verizon and AT&T with Apple iPhone.

Today’s markets were up because:

1) Durable goods orders. One of the major measurements of the manufacturing industry, which was largely responsible for pulling the U.S. out of its recession, durable goods orders climbed 4% in July, according to a Commerce Department report this morning. The report beat expectations of a more modest 2% gain, and came off a 1.3% decline in June. However, the news is a bit bittersweet, because transportation orders made up the majority of last month’s gains. When excluding aircraft orders, which climbed 43.4% last month, and other transportation-related orders, durable goods orders only rose 0.7% in July, a small increase over the 0.6% rise in June when excluding transportation’s declines that month.

2) Japan. Moody’s Investors Service cut their credit rating for Japan (NYSE:EWJ) Wednesday, downgrading the government debt one notch to Aa3, the service’s fourth-highest rating. But for the most part, markets were unscathed, as the downgrade was not unexpected, given political instability in the country, which is about to elect its sixth prime minister in five years, the march earthquake, which drastically reduced production and exports, the rising yen, and the massive amount of government debt, which is 234% of GDP. Japan now has the same rating as China, which overtook its smaller neighbor last year to become the world’s second-largest economy.

3) Capital goods. While the market’s gains were more modest today than yesterday, capital goods stocks (NYSE:XLI) effected a lot of those gains, with the sector outperforming the rest. Leading the sector to climb 1.31% today were Caterpillar (NYSE:CAT), Deere & Company (NYSE:DE), Boeing (NYSE:BA), and Cummins (NYSE:CMI), with Dycom Industries (NYSE:DY) the biggest gainer, climbing 15.47%.

BONUS: Why Did Gold and Silver Pullback?