The Impact Of Consumer Confidence And Oil
In its biggest drop in 10 years, consumer confidence
plunged today, reflecting a national uneasiness in the wake of the worst
attack ever on American soil. The index sank to 997.6 in September from 114.
Although the decline in consumer confidence was severe, it was not as bad as
some of the most pessimistic forecasters were anticipating.
Stocks had already started the session on positive
ground after yesterday’s one-for-the-record-books rally (the Dow’s fifth-best point advance ever). Indexes gyrated wildly as the anticipated report
was released at 10:00 AM ET and continued higher as traders seemed to be
saying, “it’s not as bad as we thought.” But enthusiasm for the
still-weak confidence report is waning as uncertainty about the economy and
earnings persists.
The Dow is down 90 at 8512, the Nasdaq Composite is
down 14.02 at 1485.38, and the S&P 500 is down 3.99 at 999.46.
With airlines following the trend of laying off
workers, unemployment is expected to continue rising, making consumers even
less confident about their economic futures. Honeywell, a conglomerate that
has 40% of sales coming from aerospace products, also announced it
would lay off 13% of its workforce.
Uncertainty about corporate earnings also looms as we
approach earnings season. Although JDS Uniphase
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beginning to see signs of stabilization, it still anticipates fiscal Q1
sales to be 59% below year-ago sales figures. Yesterday the market reacted
positively to the networking gear maker’s improved assessment of coming
sales. But JDSU is giving back gains and beginning to fill the morning gap,
still up .26 at 6.650.
In the sectors, North American telecom
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1.44%, and insurance
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than 1%.
Oil services
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-2.47%, networkers
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leading to the downside.
Weakness in oil services is in part due to lower
margins that result from falling crude prices. Crude took its biggest tumble
in 10 years yesterday. Prices are continuing lower today with the nearby November crude oil
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hitting a new 18-month low of 21.20 in shortened trading at the New York
Mercantile Exchange. Lower prices are due to perceptions of declining demand
expected from a recession and decreased use from airlines. Lower oil prices
will help to keep inflation down, a future worry now that the government is
freely spending again to help clean up the terrorist mess.