We are sorry to be the bearer, but this morning's stock market news wire offered nothing but the bad sort. First and foremost, Consumer Confidence sank well below expectations and is 15 points down from this past May. This drove trading into the ground after the 10:00 AM report release, but stocks have since recovered. This stock market news report also covers all the day's corporate news drivers, the Home Price Index, Investor Confidence Report, international wire, weekly same-store sales data and DC doings.
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
We highlighted the importance of the two consumer confidence metrics in our weekly copy published yesterday. We're sorry say the first of the two critical barometers of consumer well-being gave the signal to jump ship today. The Dow has since recovered from its 10:00 AM cue, but we suggest the consumer confidence metric will only garner increasing attention as the day progresses. Home prices are not offering what we would view as good news either, and investor confidence is in the tank as well, based on State Street's report. Thus, the stock market news wire is a bloody one today.
Consumer Confidence Greek Factor: -2
The Conference Board reported on a deep loss in Consumer Confidence at 10:00 AM ET Tuesday. This September measurement of consumer mood fell well lower than economists' expectations, dropping to 48.5, from 53.5 at last check. Economists expected a mark of 52.0, so this is all-inclusive terrible news (absolute and relative). Worst of all, confidence is down about 15 points since May. Given the importance of the consumer mood on the US economy, this factor is overwhelmingly the most important data point of the day Tuesday and should drive stocks down into the close.
Home Prices Greek Factor: -1
Redundant as it may be, the S&P Case Shiller Home Price Index was reported this morning for the month of July (and yes we are entering October). Both the 10-City and 20-City Composites showed moderating paces of growth on a year-to-year basis. Growth moderated to 4.1% and 3.2% for the 10 and 20-city measures, respectively. 16 MSAs posted year-over-year increases in price, which (reminding you) was not very hard to accomplish. On a month-over-month basis, sales also moderated on average to 0.8% and 0.6% for the 10-City and 20-City Composites, respectively. 12 of the 20 measured cities posted growth, which means that 8 posted declines in home prices in July.
"A normalized market that includes the absence of government stimuli might also reflect the fact that about 20% of Americans are not earning satisfactory income to spur spending, and banks are not lending to them nor anybody else very easily."
While the economists behind this data hedged by calling for a flattening of home prices, we remind how process works. Just like most economists or people who would like to protect their jobs or reputation, Blitzer and Shiller seem to be simply reflecting the current situation in their analysis (and by current, I mean three months late, based on this data). We suggest investors remember that the laws of momentum typically call for a slowing before a stop and then reversal. A normalized market that includes the absence of government stimuli might also reflect the fact that about 20% of Americans are not earning satisfactory income to spur spending, and banks are not lending to them nor anybody else very easily.
Investor Confidence Greek Factor: -1
State Street (NYSE: STT) reported on Investor Confidence at 10:00 AM. Investor Confidence fell further in September, to 88.0, from 92.1 in August and 96.5 in July. The news was even worse than the headline indicates, with North American confidence dropping 7.3 points.
ICSC Weekly Sales Greek Factor: 0
The International Council of Shopping Centers (ICSC) was first to the wire on Tuesday with its regular Weekly Same-Store Sales Report. Sales recovered off a Labor Day impacted comparison from the week before, where sales fell 1.4% week-to-week. We expect future weeks to offer less noisy data, and this week's report covering the period ended September 25 showed a 0.4% weekly gain. Sales were 3.6% higher against the prior year comparable, but look to coming weeks for clearer comps. That said, we may have forgotten some factor from the prior year period here that perhaps weighed on sales in September 2009 (last week also showed 3.3% growth). Redbook showed sales increased 2.5% year-over-year in the latest weekly period.
DC Doings Greek Factor: -1
In DC, the Senate Budget Committee will examine the outlook for the economy and fiscal policy. This should make for an interesting political scuffle, as Republicans forget their sins of the past and point to Democrats as culprits behind recent deficits. There's a tough political debate in progress now, a fundamental struggle between fiscal prudence posturing and economic stimuli storm trooping. Meanwhile, the Senate Judiciary Committee examines ways to restore anti-fraud and anti-corruption laws post the Supreme Court decision regarding Enron's Jeffrey Skilling.
International Markets Greek Factor: -1
Dollar/Euro: The British Pound slid Tuesday on a Bank of England (BOE) official's statement pointing to his backing of more asset purchases. The euro rose against the dollar on the news, to its highest level since April. The euro is also still benefiting from rising Federal Reserve concern about the US economy and plans for further stimulus in the US.
Ireland: The Irish government is coming under increased pressure heading into the coming year, as it will likely implement further cuts in its December 7 budget. The Irish are currently awaiting the Central Bank of Ireland's most recent estimate of the cost of restructuring nationalized Anglo Irish Bank Corp. (NYSE: AIB).
North Korean leaders met in a rare gathering that provided some insight into Kim Jung-il's succession plan. He appointed his youngest son to the position of General.
Corporate Drivers Greek Factor: +1
Coca-Cola (NYSE: KO) announced plans to invest $1 billion in the Philippines over a five year span. KO shares are relatively unchanged on the news. Wal-Mart (NYSE: WMT) proposed the $4.6 billion purchase of South African wholesaler Massmart Holdings, but an important labor group stands opposed to the deal. WMT shares are down fractionally on the potential deal. Southwest Airlines (NYSE: LUV) announced a deal to acquire AirTran Holdings (NYSE: AAI) for $1.4 billion. Both stocks are trading up fractionally on the news. Walgreen's (NYSE: WAG) shares are up nearly 9% on its stronger than expected fiscal quarter numbers. Endo Pharmaceuticals (Nasdaq: ENDP) announced a deal to acquire Quality Pharmaceuticals from Apax Partners for $1.2 billion. Its shares are up +9% on the news.
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