We hear consumer confidence hit a three-year high in February, at 70.4, according to the Conference Board. Guess this level looks a lot better coming up out of the basement than it did the last time it was visited in February 2008.
“”There is no evidence that the recent collapse in consumer confidence is going to turn around any time soon,” said Brian Bethune, senior economist at Global Insight, as quoted by the AP back then. Stories note at the time it was the worst confidence reading since the start of the Iraq War in 2003, and excluding that one, worst since 1993. So this level hasn’t been associated with “happy days” in the past.
Look, it’s better than heading lower, but it’s a bit of a stretch to suggest it’s a sign consumers are gearing up to unleash some wave of pent-up spending. Conference Board tries to put the best spin on it, but the overall damp mood can only be spruced up so much. The outfit says “consumers’ appraisal of present-day conditions improved moderately in February.” What’s “moderately” mean? Continue reading…
We may have gotten an insight today into the Fed’s real thought process when it come to quantitative easing, the so-called QE2 everybody’s expecting. Brian Sack, the head of the New York Fed’s markets group, was speaking today about the benefits to the economy that could come should the Fed decide to launch into a big bond-buying program.
There has been fierce debate on the subject, even within (or, more precisely, especially within) the Fed itself. But most people still think this is a fait accompli, that the Fed, in not so many words, will be cranking up the printing press. What will they accomplish by this? Well, you can imagine that interest rates will stay low, if not move lower. How’s that an accomplishment when rates are already at historic lows? Well, it isn’t, but it also isn’t really the point.
From Mike Derby’s write-up of Sack’s speech:
While asset buying is an “imperfect policy tool,” Sack said “balance sheet policy can still lower longer-term borrowing costs for many households and businesses, and it adds to household wealth by keeping asset prices higher than they otherwise would be.”
“…by keeping asset prices higher than they otherwise would be.” Bingo! John’s the one that noticed that in the speech and jumped all over it. Because what’s he actually saying there, in typical Fed jargon, is that the central bank is looking to keep asset prices artificially high. That one of the goals of QE2 is to keep asset prices artificially high.
In less polite circles, that’s called market manipulation, and it often leads to perdition.
US stocks slide modestly, as a number of other asset classes rise in response to the likelihood of the Fed unleashing another big round of bond-buying and liquidity flooding, and the implications for the dollar that come with it.
DJIA slips 22 to 10739, S&P 500 loses 6 (0.5%) to 1134, Nasdaq Comp drops 15 (0.6%) to 2335. But again, the real action’s outside the equities pits. Dollar drops against, well, everything. Gold nears $1,300/ounce, two-year yield hits a record low. The dollar-debasement trade, as noted elsewhere, is alive and well.
If the Fed’s primary fear is deflation, what’s that say about the real state of the economy? Nothing good, Mouseketeers, nothing good at all. Take a look at General Mills’ earnings today. The company, which makes products we all know, saw sales creep higher, and is getting squeezed between rising commodity costs and its inability to pass those costs along.
New York Times issued a warning about its revenue.
Adobe got killed on its outlook.
The FHFA said home prices are down 3.3% from a year ago. Mind you, before the housing crash, it was accepted as a fact of life that prices never fell. Now a drop like that elicits a shrug.
Keep an eye out tomorrow for the number of people falling off the emergency unemployment claims rolls, when the Labor Department reports jobless claims. It’s far from clear how many of them are finding jobs and how many are falling into oblivion, and how many of the ones finding jobs are finding good ones, ones that pay living wages. After all, these days it’s debatable whether even $250,000 constitutes wealthy (at least, it is if you live on the coasts.)
There’s nothing surprising about the May new home sales report. We all knew a bad number was coming. Yet the report still managed to shock when it crossed the tape earlier today.
Without a government subsidy to prop up the housing market, new-home sales in May plunged 32.7% to a record low 300,000, worse than the 20.6% drop to 400,000 that economists had estimated. Sales dropped in all four regions, including a whopping 53% plunge in the West. The steep decline also comes after two months of big increases as buyers earlier rushed to qualify for the tax credit before its expiration.
“Bottom line, we knew there would be a large post tax credit drop in sales but the degree is obviously big,” says Miller Tabak’s Peter Boockvar. Beyond today’s data, he wonders what will happen in the near-term as markets adjust to life without the subsidy. “The distortion of steroid shots into the marketplace has only made long-term planning and thus efficiently allocated capital that much more difficult to coordinate.”
The government, of course, was hoping that the economy would’ve improved by the time the tax credit faded so that increasing employment and income would’ve helped stabilize the housing market, Barbara Kiviat points out at Time’s Curious Capitalist blog.
But “anyone who was surprised this morning that this hasn’t yet happened hasn’t been paying attention,” she says. Now, instead of a tax credit, all the market can rely on is the “fundamental force of affordability.”
- Reuters blogger Felix salmon chronicles the changing state of the TV industry. “Pretty soon, the consumer is going to have a lot more power, and that’s going to change the game in profound and fundamental ways.”
- Keep an eye on stocks during the first five trading days of the year, Tom Petruno writes at LA Times’ Money & Co blog, as Wall Street’s tone at year’s beginning is typically a reliable indicator of market’s direction for remainder of the year.
- Don’t expect housing prices to return to the mid-2000s boom levels for years, if not decades, Harvard economist Edward Glaeser writes at Economix. Prices were essentially flat between September and October, which isn’t a bad thing.
- Is Apple’s history repeating itself? Henry Blodget offers an interesting take on whether Apple is making the same strategic mistake it made in the 1990s.
- About 85% of stocks in S&P 500 are trading above their 50-day moving averages. “The fact that breadth has caught up with the new highs in the overall market is a good thing for the health of the bull market,” Bespoke Investment Group says.
- The economy’s path to prosperity is still clouded by government stimulus, Tim Duy says.
- Berkshire Hathaway gave a public warning to Kraft over its pursuit of Cadbury. The move came after Kraft sweetened its hostile takeover offer.
- Ford posted a 33% rise in December US auto sales, while both GM and Chrysler registered single-digit declines.
Posted by Steven Russolilloon October 27, 2009 Economy, Housing, Markets /
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Consumer confidence unexpectedly fell in October as the troubled labor market continues to weigh on confidence. Wall Street tends to dismiss unemployment as a lagging indicator, but Main Street clearly thinks differently.
Home prices also rose for a third consecutive month, according to Case-Shiller, but worries about rising unemployment and the expiring first-time home buyer tax credit remain.
Paul Vigna and Madeleine Lim discuss it all and more on Tomorrow’s News Today.
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