U.S. Stocks Tumble as the Day Progresses
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After getting off to a positive start, on the heels of yesterday’s encouraging performance, the stock market is tumbling right now. The Dow is more than 100 points down, and the Nasdaq and S&P 500 are also sustaining significant losses. The main problem today is the fact that consumer confidence came out lower than expected — especially since analysts expected to see some improvement in consumer confidence. MarketWatch reports on consumer confidence, and it’s impact on the stock market today:
A shaky consumer-confidence reading that aggravated investors’ fears of weak profits and a prolonged recession pushed stocks lower on Tuesday.
New housing data were also glum, though the market managed to hold steady at the open following their release. The losses in major indexes began to pile up about a half-hour after the bell, when the Conference Board said its index of consumer confidence for June fell to 49.3, from a revised 54.8 in May, which was originally reported as 54.9.
Consumer spending accounts for 2/3 of the U.S. economy. As a result, it is little surprise that Wall Street is extremely concerned about consumer sentiment. When consumers feel confident, they are more likely to spend money, resulting in earnings for companies. This in turn prompts stock prices to head higher. When confidence is low, investors expect that consumers will reign in their spending, resulting in reduced profits. And any reading below 50 on the consumer confidence index generally indicates bearishness.
One of the main reasons that consumer confidence is struggling is probably due to employment. With employment approaching 10%, consumers are concerned about their futures. Until the labor market stabilizes, it is unlikely that any real improvement in consumer confidence will materialize.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
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July 1st, 2009 at 12:12 pm
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