Markets are looking forward to hearing from U.S. President Bush tonight and the Fed tomorrow, but in the meantime traders are mulling over today’s U.S. economic data.

First, U.S. durable goods orders for December were weaker than expected. Orders recorded just a 0.2% gain, coming off a 1.3% drop the previous month. “There were several underlying stories in December’s data,” said RBC Financial Group economists. “Excluding transportation, orders were up 1.1%, as a 4.5% drop in motor vehicles and parts orders dragged down the result. However, much of the strength in ex-transportation orders came from defence orders, mostly defence capital goods (which rose 17.4%). Excluding defence, orders were down 0.2% in December.”

“New orders are virtually flat from a year ago, up a scant 0.1%, as firms continue to hold off on spending. Inventories jumped by 1.0%, the first increase in almost two years, and the largest since mid-2000. While this may be a sign that stockpiles are being rebuilt, the two-month slide in shipments makes us cautious,” says BMO Nesbitt Burns. “This report suggests that U.S. firms remained very cautious at the end of 2002.”

U.S. consumer confidence slipped only a little in January, despite war jitters, says Nesbitt. The headline index was 79, barely down from December’s upwardly revised 80.7 reading. “These numbers actually were a relief. Taken together with the strong housing data this week, the results suggest the demand side of the U.S. economy is holding up well,” Nesbitt says.

RBC agrees, “U.S. consumer confidence fell again in January, but the news wasn’t as bad as markets feared. This report represents downside risk to U.S. consumer spending. Given the hobbled state of business confidence, consumer spending is all the U.S. economy can count on these days, and falling confidence usually means less spending and more saving.”

Today’s final report also provided some good news, albeit somewhat backward-looking, RBC concludes. “New home sales in the United States rose 3.5% in December to a new record high of 1.082 units, above expectations. By and large most economists expect the housing market to cool off in 2003, although low interest rates will prevent a sudden drop-off in activity.”

Most of this data is being downplayed though with war fears dominating the market’s attention.