Mid-Day Recap: Markets Turn Sour on Weak Consumer Confidence

Despite early gains in the first minutes of trading, all three indexes are rapidly erasing Monday’s gains in the first 90 minutes of the session. The data has been mixed this morning, with consumer confidence falling, contraction in the Midwest slowing down, and house prices displaying a sign or two of stabilization.

As off 11:00, the S&P 500 has shed 1.08% to 917, the Dow is down 1.13% to 8433, and the Nasdaq is 0.47% lower at 1835.

The day began with the 9:00 release of the the Case-Shiller Home Price Index. The index of 10 metropolitan areas recorded annual price deflation of 18.0% in April, a favorable reading compared to the -18.7 print in March.

“The stock market bottomed in March and measures of consumer confidence have turned upward,” said David M. Blitzer, chairman of the index committee. “This report shows that these better spirits are also appearing in the housing market.”

The monthly price measure showed 13 of the 20 metro areas improving in their annual return compared to March. 

Forty-five minutes later the ISM-Chicago Business Barometer reported some improvement in conditions in the Midwest. The regional index advanced by 5 points to a 39.9 reading in June, a decent improvement from the weak reading in May but still 10 points away from expansion.

“This is consistent with our view that the pace of contraction is slowing, and growth will resume (albeit moderately) in the fourth quarter of this year,” said Joseph LaVorgna from Deutsche Bank.

The news that caused the S&P to tumble 15 points in half an hour was the 10:00 Consumer Confidence release. The Conference Board report said sentiment retreated to 49.3 from a prior reading of 54.8, marking the first fall since February.

The headline was bad, but details were worse: Those stating jobs are “hard to get” increased to 44.8% from 43.9%, while only 4.5% of the population believe jobs are “plentiful.” More broadly, those claiming business conditions are “good” decreased to 8.0% from 8.8%, while those saying conditions are “bad” increased to 45.6% from 44.5%. 

In addition, only one-fifth of consumers expect business conditions to improve in the second half of the year. And worse: just 17.4% of people believe there will be more jobs on the market in the short-term, while 27.3% believe there will be fewer jobs.

Despite the mid-morning losses, the second quarter should end on a pretty optimistic note. As of yesterday, the S&P was up 16% in the quarter, the Nasdaq had climbed 21%, and the Dow was up 12%.

Data in the rest of the week is heavy enough to turn markets back up if the news is positive. Tomorrow the ISM Manufacturing report is expected to show some improvement, and on Thursday the employment numbers in June are expected to show that job cutbacks are slowing down. 

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.