Five-Day Forecast: All Eyes on Factory Floor

Perhaps the economy has dodged a bullet. This week's bullish reading on durable-goods orders, along with an upward revision in first-quarter GDP, implies that we are not yet seeing a major slowdown in the manufacturing sector of the economy.

On Tuesday, June 3, we'll get a look at the monthly reading of factory orders. The durable-goods figures have been very erratic for the last three months, so it's not clear if the factory goods number will come in above or below forecasts.

In late 2007, factory orders slowed to crawl, but they have recently spiked to a roughly 5% annualized growth rate. Economists believe that factory orders were still rising at a 3% to 5% annualized clip in May.

Keep watching factory floor activity, as it determines whether we can skirt a major economic downturn. In the last few years, the service sector has continued to power economic growth. Yet as you can see from the chart below, the service economy is slowing, even as manufacturing readings have continued to fall.

Goods vs. Services

Click here for larger image.

For the economy to stay afloat, the manufacturing sector will need to pull its weight. Perhaps the weak dollar will help fuel continued growth in exports. Or perhaps weak domestic demand will create too much of a headwind for the sector.

Ciena Grows in a Soggy Field

For the second time in a decade, the telecom equipment sector is facing another difficult stretch. Major equipment makers such as Alcatel Lucent (ALU Quote - Cramer on ALU - Stock Picks) and Nortel Networks (NT Quote - Cramer on NT - Stock Picks) are noting a sharp slowdown in demand. That macro sentiment helps explain why shares of Ciena (CIEN Quote - Cramer on CIEN - Stock Picks) have fallen more than 30% in the last six months.

But if you dig deeper, you'll find a telecom equipment player that is growing at a rapid clip and is attractively priced.

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