There is no question that the recession took its tool on Caterpillar Inc. (NYSE: CAT). The company saw its stock plummet from mid 2008 through March of this year. Along the way the company was forced to layoff employees to help lower costs, but it announced today that it would be rehiring 550 of its laid off workers.

Chief Executive Officer Jim Owens announced the news and stated that the company was pleased that "signs of recovery in the global economy" is allowing it to bring back some employees.

U.S. durable goods orders fell 1.7% in February 2008, as demand for machinery dropped substantially, the U.S. Commerce Department announced Wednesday.

Economists surveyed by Bloomberg News had expected February 2008 durable goods orders to rise 0.7%. Durable goods orders decreased a revised 4.7% in January 2008. Excluding transportation, durable goods orders fell 2.6% in February 2008, the biggest decline since January 2007.

Machinery orders weigh

In February 2008, capital goods orders fell 2.6% following a 1.8% drop in January 2008, as businesses cut back purchases that enhance productivity -- historically a sign that they believe sluggish economic times are ahead. Equally telling, machinery orders plunged 13.3% in February 2008. Motor vehicle orders dropped 2.7%. Aircraft orders were a bright spot, rising 5.4%.

Shipments dropped 2.1%, the most since January 2007. Orders excluding defense equipment declined 1.6% and bookings for military gear plummeted 10%.

More bad news for U.S. economy

Economist David H. Wang told BloggingStocks Wednesday the disappointing February 2008 durable goods statistic is more troubling news for the economy.

"If we're not in a recession right now, I don't know what nation is," Wang said. "Demand is weakening and American corporations are putting off capital goods purchases on what they're seeing in the home economy, which is softer demand." Wang added that U.S. multinational corporations will continue to benefit from decent export sales, particularly to emerging markets, but domestic market-oriented companies will show "clear effects of the U.S. slowdown" in their quarterly results this year.

MOST NOTEWORTHY: The environmental services sector, the machinery and capital goods sector and several bank holding companies were today's noteworthy initiations:

• Credit Suisse initiated shares of Allied Waste Industries Inc (NYSE: AW), Republic Services Inc (NYSE: RSG) and Waste Management Inc (NYSE: WMI) with Outperform ratings and a $16 target, $35 target and $45 target, respectively.
• Bernstein initiated the machinery and capital goods sector, initiating shares of Caterpillar Inc (NYSE: CAT) and Illinois Tool Works Inc (NYSE: ITW) with Outperform ratings and a $100 target and $68 target, respectively and Deere & Company (NYSE: DE), Eaton Corporation (NYSE: ETN), Ingersoll-Rand Company Ltd (NYSE: IR) and Parker-Hannifin Corporation (NYSE: PH) with Market Perform ratings.
• Sandler initiated shares of Preferred Bank Los Angeles CA (NASDAQ: PFBC) and UCBH Holdings, Inc (NASDAQ: UCBH) with Buy ratings and shares of Cathay General Bancorp (NASDAQ: CATY) and East West Bancorp, Inc (NASDAQ: EWBC) with Hold ratings.

OTHER INITIATIONS:

• Golfsmith International Holdings Inc (NASDAQ: GOLF) was initiated at Wedbush with a Buy rating and $8.75 target, as the firm believes the company is an attractive growth story and buyout candidate.
• Pharmasset Inc (NASDAQ: VRUS) was initiated with a Buy rating and $12 target at Banc of America, as the firm believes Clevudine has the potential to be best in class for the treatment of the hepatitis B virus.
• Ciena Corporation (NASDAQ: CIEN) was initiated with an Outperform rating and $40 target at Piper Jaffray.

MOST NOTEWORTHY: Level 3 Communications (LVLT) and the Machinery Sector were the most notable initiations today.

• Credit Suisse initiated Level 3 Communications (NASDAQ: LVLT) with an Outperform rating and $7.50 target; the firm expects Level 3 to continue to benefit from strong demand for higher data usage.

• Morgan Stanley initiated the Machinery Sector with an In-Line rating.
  
• Within the sector, Deere & Co (NYSE: DE) was started with an Overweight rating and $116 target, Terex Corp (NYSE: TEX) with an Equal Weight rating and $67 target, and Caterpillar Inc (NYSE: CAT) & Agco (NYSE: AG) with Underweight ratings and targets of $52 & $25 respectively.

OTHER INITIATIONS:

• Baird initiated Alcatel-Lucent ADS (NYSE: ALU) with a Neutral rating and $15 target citing valuation and integration risks.

• Ferris Baker Watts initiated Navigators Group (NASDAQ: NAVG) with a Sell rating and $43 target; the firm said Navigators' balanced growth will serve to reduce underwriting/EPS volatility when the next highly active catastrophe season surfaces.

• Prudential initiated Allergan Inc (NYSE: AGN) with an Overweight rating and $138 target; the firm expects 2007 to be another strong year driven by medical aesthetics products acquired from Inamed in last year.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).