Factory orders fell 0.7 percent in February, a decline that exceeds Econoday's consensus for a 0.4 percent decline in a report that shows cracks throughout. Durable goods orders are unrevised at last week's advance 1.0 percent fall with nondurable goods, the new data in today's report, down 0.4 percent.

Total orders on a year-over-year basis are up only 2.7 percent, down from January's 3.8 percent and the lowest reading in two years. Orders for core capital goods, a reading that excludes both aircraft and defense goods and is considered a key barometer of business investment, are revised lower from last week's 0.2 percent gain to a 0.1 percent fall. This is the third decline in the last four months and the fourth decline of the last six months. High interest rates and high rates of inflation are likely culprits.

Total unfilled orders are down 0.1 percent on the month for the first decline in 2-1/2 years. Total shipments are down 0.5 percent for their third decline in four months. Rounding out the shut out are inventories which are down 0.1 percent for a second straight month.

Business surveys such as yesterday's ISM report have been signaling manufacturing contraction for months and months and are now being confirmed by factory data. However much US GDP continues to expand, manufacturing traditionally considered the leading indicator for cyclical economic shifts is not contributing to the growth.

These results add on to a sudden run of negative US data that are coming up far short of expectations, as measured by Econoday's Consensus Divergence Index which has fallen to minus 42, the lowest level in five months.

Factory orders are expected to fall 0.4 percent in February versus January's 1.6 percent fall. Durable goods orders for February, which have already been released and are one of two major components of this report, fell 1.0 percent in the month.

Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month.

Investors want to keep their fingers on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth which is less likely to cause inflationary pressures. By tracking economic data like factory orders, investors will know what the economic backdrop is for these markets and their portfolios. The orders data show how busy factories will be in coming months as manufacturers work to fill those orders. This report provides insight to the demand for not only hard goods such as refrigerators and cars, but nondurables such as cigarettes and apparel. In addition to new orders, analysts monitor unfilled orders, an indicator of the backlog in production. Shipments reveal current sales. Inventories give a handle on the strength of current and future production. All in all, this report tells investors what to expect from the manufacturing sector, a major component of the economy and therefore a major influence on their investments.