Housing Slowdown Hasn't Slowed Down Consumer Spending

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Includes: DIA, IVV, IWM, SPY, VTI
by: Judith Levy

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Producer Prices Slide 1.6%, Easing Inflation Concerns [Wall Street Journal]

Summary: Americans kept up their spending during October, reassuring economists that holiday sales will be healthy enough to offset the housing slowdown. The drop in house prices has made consumers feel poorer, but wage gains and cheaper gas bills have given them more money to spend. Sales at food and retail establishments rose to $332 billion in October, up 0.4% from September and 6.5% from a year earlier. In a surprise, sales at auto and auto-parts dealers also rose by 0.6%, notwithstanding the auto companies' grim forecasts. Declines were seen at gas stations and in building-related industries. The sales report, in combination with a 1.6% decline in wholesale-goods prices in October from September, suggests the economy is cooling enough to keep inflation in check. Stock and bond prices rose on the corrolary assumption that the Fed will be able to hold short-term interest rates steady at 5.25%.
Related links: Media coverage: Newsday. Commentary: Will Housing Bring Down the Economy?All Eyes on This Morning's PPI ReportEvil Inflation -- Or Is It?.
Potentially impacted ETFs: Total Stock Market VIPERs (NYSEARCA:VTI), Standard & Poor's 500 Index Depository Receipts (NYSEARCA:SPY), DIAMONDS Trust (NYSEARCA:DIA), iShares S & P 500 (NYSEARCA:IVV), iShares Russell 2000 (NYSEARCA:IWM)

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