Tuesday, May 30, 2006

Consumer underconfidence

The 10am EST release of the consumer confidence index was highly anticipated. With 109.2 as the previous number and the forecast at 104, there was bound to be market turmoil. The actual reported number came in below briefing forecast at 103.2.

The press is asserting the low confidence numbers are the cause of the market swoon today, but as I noted yesterday the whisper number (which is not exactly secret, being that it's published on news feeds) was 100 so the market was generally prepared.

It's possible that we're seeing a combination of two things. One is that negative news like lowering confidence gives an excuse for selling. The other is that lower consumer confidence correlates well to negative happenings that impact the consumer. It's possible that this is a leading indicator, for example, that Thursday's highly anticipated jobless claims number may be a bad one. Expecting bad news from consumer confidence and having it verified are two different things... now traders start looking toward later upcoming reports with a negative expectation and try to get ahead of them.

I expect the market to remain choppy for at least another week, probably longer.
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