By Carlos Guillen
Equity markets are having a very encouraging trading session as investors have been enthused by better than expected consumer sentiment data, which served to offset not so great industrial production numbers.
Earlier this morning, government data showed factory production unexpectedly declined in January by the most since May 2009, adding to the evidence that the severe winter weather weighed on the economy. According to the U.S. Federal Reserve, industrial production during January decreased month-over-month by 0.3 percent, worse than the Street's consensus estimate calling for a 0.3 percent increase. In the same time range, capacity utilization decreased from 78.9 percent to 78.5 percent, landing lower than the Street's consensus estimate of 79.4 percent. Clearly the cold weather has knocked manufacturing and mining output, adding to concerns this morning.
However, quite encouraging today was that consumer sentiment landed higher than expected; however, the index really experienced no change. The University of Michigan's Consumer Sentiment February result landed at 81.2, higher than the Street's expectation of 80.2, flat from the 81.2 reached in January. Consumers as a whole are positive about the economy as equity markets and housing prices are holding up well, giving them a comforting feeling of increasing wealth, and helping to offset negativity from a slowing jobs market. The reading may be indicating that consumers may pick up the pace of spending after a winter-related slowdown in January. We should note that for those in lower income brackets, consumer spending will likely decline as the recent freezing temperatures and inclement weather will result in higher than normal heating bills in the near term. Quite encouraging though, was that the expectations index increased from 72.1 to 73.0.
In all it stocks continue to move to highs for the session, with the Dow Jones Industrial Average up over 90 points, putting the index on track for its largest weekly gain this year, a gain of over 320 points, not too shabby.