Midday Market Update: Consumer Confidence Fails To Extend Rally

June 12th at 10:00am by Tom Lydon

As seen throughout the week, U.S. stocks and exchange traded funds (ETFs) have see-sawed in morning trading as investors try to figure out where the economy is heading once and for all.
On a positive note, consumer confidence rose to a nine-month high. The Reuters/University of Michigan Survey of Consumers index for confidence rose to 69.0 from 68.7 in the previous month. Unfortunately, fears of inflation as well as job and income uncertainty are still keeping consumers wary of the future of our economy and the strength of its recovery.

The Labor Department states that U.S. import prices rose by 1.3% in May, up from a revised jump of 1.1% in April.  This jump was fueled by rising fuel prices and the weakness of the U.S. dollar.  Optimists are reading this data as a sign that an economic recovery may be near citing that prices have leveled off from their prolonged slide.  On the other hand, pessimists believe that the data further supports the lingering fear of inflation.

Black gold has cooled off a bit, giving back some of its gains. It’s trading at a hair over $71/barrel on the New York Mercantile Exchange as investors take their profits and head for the hills.  Fortunately for the commodity, there are still some signs that it will be demand in the near future.  The United States Oil (USO) is down about 0.5% in morning trading.

The U.S. commercial paper market for short-term corporate borrowing, suggest that an economic recovery may be a faint dream.  Commercial paper are the IOUs written by corporations for periods of three months or less. They enable these companies to raise funds to run day-to-day operations. The decline in borrowing by corporations in this market indicates weak demand in the economy as a whole, meaning there is little need for companies to borrow to build up business.  The general trend is that business borrow in the commercial paper market to rebuild in anticipation of rising sales and a growing economy.

Overall, all three major indexes are in negative territory in morning trading.  The Dow Jones Industrial Average gave back about 0.1%, the S&P 500 dropped nearly 0.3% and the Nasdaq declined 1%.

For more stories on oil, visit our oil category.

Kevin Grewal contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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