Midday Market Update: Markets Dip On Consumer Concerns | ETF Trends

U.S. stocks and exchange traded funds (ETFs) plunged this morning as investors remain worried that consumers are still to anxious about the economy to start shopping again.

A couple of signs of concern:

  • The CBOE Volatility Index (VIX) jumped more than 15%.  This index is an indicator and gauge of fear in the markets and moves inversely to the S&P 500.
  • Lowe’s (LOW), the nation’s second largest home-improvement retailer reported earnings of $0.51/share, falling short of Wall Street’s expectations. The home improvement retailer blamed weak consumer spending and inclement weather for the decline.  As a result of the poor economy and consumer pullback, the retailer plans to scale back new store openings and expects future sales to decline.

To help spur lending to consumers, the Fed has extended its Term Asset-Backed Securities Loan Facility through March 31 for most loans that it makes. The program was constructed to ease credit, stabilize the financial system and help end the recession.  It enables investors to use the funds of the program to buy securities backed by auto and student loans, credit cards, business equipment and loans guaranteed by the Small Business Administration.  The program has the potential to generate up to $1 trillion in lending for households and businesses.

It appears that things are getting a bit more optimistic in Asia. The Japanese government reported that Japan’s economy has finally climbed out of a recession, expanding 3.7% at an annual pace.  This recovery was driven by robust demand for autos, video recorders and other electronic goods and an increase in exports to China.  Some economists are still a bit wary of the nation’s future because domestic consumer spending remains fragile amid plunging incomes and rising unemployment, states Yuri Kageyama for the Associated Press.  The iShares MSCI Japan Index (EWJ) dropped 2.9% in morning trading.

The caution that loomed over Wall Street further spread to the oil markets as crude oil dipped to its lowest level of the month, hitting an intra-day level of $65.32/barrel. The decline snapped a four-week rally of gains.  The United States Oil Fund (USO) dipped 2.6% in  morning trading.

Overall all three major U.S. indexes were down in morning trading with the Dow Jones Industrial Average losing 2%, the S&P 500 dropping 2.3% and the Nasdaq dipping by 2.5%.

For more stories on Japan, visit our Japan 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.