While you were sleeping: US consumer lifts Wall Street

Wednesday 29th February 2012

Wall Street advanced as a report indicated US consumers were more confident than anticipated. Limiting gains, however, were separate data showing bigger-than-expected declines in durable goods orders and in home prices.

US consumer confidence climbed to a one-year high in February bolstered by optimism about improvement in the jobs market, according to a survey. In a nation where consumer spending accounts for more than two-thirds of economic activity, that's a good sign.

"This continues the trend we've seen over the past few months where we're getting data that indicates things are getting better," Mike Shea, managing partner and trader at Direct Access Partners in New York, told Reuters.

But economists struck a note of caution, too.

"The big question is how will consumers respond to higher energy and gasoline prices. The recent increases did not find their way into this, so it will be interesting to see how they will respond in the months ahead," Tom Porcelli, chief US economist at RBC Capital Markets in New York, told Reuters.

In early afternoon trading in New York, the Dow Jones Industrial Average rose 0.23 percent, the Standard & Poor's 500 Index gained 0.27 percent and the Nasdaq Composite Index climbed 0.71 percent.

Shares in Apple are higher for a fourth day after the company sent out invites for a March 7 event where it is expected to reveal the third version of its iPad tablet.

Keeping a lid on gains were disappointing data from two separate reports that raised question marks about the strength of the world's largest economy.

US durable goods orders slid 4 percent last month, the largest drop since January 2009, according to Commerce Department data. Analysts had forecast a decline in orders of 1.0 percent.

"It is not a great start to January," David Watt, a currency strategist at RBC Capital in Toronto, told Reuters.

A separate report showed home prices weakened in December. The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from a year earlier, after dropping 3.9 percent in November. The median forecast of 31 economists surveyed by Bloomberg News called for a 3.7 percent decline.

The signs of weakness in durable goods orders weighed on oil, too. Crude oil for April delivery shed 0.6 percent to US$107.93 a barrel by about midday on the New York Mercantile Exchange, dropping for a second straight day.

Also hurting crude were expectations that an Energy Department report tomorrow will show US crude supplies rose to the highest level in five months last week, according to the median of analyst responses in a Bloomberg survey.

"The durable goods numbers do not paint a picture of robust demand going forward,” Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, told Bloomberg. “We’re going to see builds in this week’s report, which is also putting downward pressure on prices.”

In Europe, the Stoxx 600 Index ended the day with a 0.2 percent advance. European banks are expected to be enthusiastic borrowers when the European Central Bank offers cheap cash at a planned financing operation tomorrow.

The ECB's initial similar financing operation is credited with helping ease pressure on the yields of Italian and Spanish debt securities, and a key reason why those two nations have been rushing to tap markets for fresh capital in the last two months.

BusinessDesk.co.nz

Comments from our readers

No comments yet