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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • Stocks Rise In Spite Of Declining Confidence By WSS Research Desk 0 comments
    Oct 29, 2013 2:05 PM

    By Carlos Guillen

    Quite surprisingly today, equity markets are making a very encouraging move to the upside even as U.S. consumer confidence fell sharply this month to a worse than expected level.

    According to the Conference Board, its index of consumer confidence declined to 71.2 in October, from a revised 80.2 in September, which was originally 79.7. This result was also well below the average forecast of economists that expected a reading of 74.5. However, even more concerning was that consumer expectations for economic activity over the next six months plummeted to 71.5 in October from a revised 84.7 in September. Given that this figure tends to be more predictive than the overall index, it certainly does not bode well for consumer spending as we enter the holiday shopping season, which is so critical for gross domestic product growth. The board's present situation index, which is a measure of consumers' assessment of current economic conditions, declined to 70.7 from a revised 73.5. As it stands, all of these results were at their lowest levels since last spring, when consumers were getting hit with higher tax rates.

    Perhaps a bit encouraging was that prices paid by producers declined slightly. According to the Department of Labor, the Producers Price Index (PPI) in September decreased month-over-month by 0.1 percent; this compares with the Street's consensus estimate calling for a 0.2 percent rise. Excluding food and energy contributions to the price index, core PPI increased month-over-month by 0.1 percent, matching economists' average forecast. While this is indicative of sluggish end demand, the good news is that it certainly should provide more impetus for the Fed to continue its "accommodative" stance when they meet later today and tomorrow.

    (click to enlarge)

    At the moment the overall negative data points are being overshadowed by an earnings season that has been delivering, for the most part, better than expected financial results and by the strengthening belief that the Fed will continue to leave its asset purchase program unchanged through the end of the year and well into the next.

    Case Shiller Home Price Index
    By David Urani

    The August Case Shiller home price index was up 1.3% month to month (non-seasonally adjusted) which exceeded the 0.8% consensus estimate. That made for a 12.8% gain year over year as well. And so that means prices have risen each month so far this year although we do note, as always, that the Case Shiller index is nearly three months old while also being a three-month moving average so it doesn't necessarily reflect the latest developments in the housing market.

    This is another solid reading for home values, which despite lots of clamoring about mortgage rates that begin in the middle of this year, hasn't broken down at all yet. It's also the highest reading since August 2008. Home prices have certainly made some nice strides since bottoming out early last year and in a way we do wonder if they've come up too far too fast (due in some part to Federal Reserve stimulus). That combined with an uptick in mortgage rates this year has made for a swift increase in the overall cost of owning a home, thus some recent cautiousness in home demand. Nevertheless, at this stage prices are still 20% below the 2006 peak level.

    (click to enlarge)

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