Sunday, February 28, 2010

Headed Down For The Second Time

Poor Consumer Sentiment Tests Double-Dip Reality
Todd M. Schoenberger~February 26, 2010

This has not been a good week for U.S. consumers. First, we received the February consumer confidence reading, which detailed how Americans are feeling less and less secure about their personal financial situation. Then, we received data on the number of individuals filing for first-time unemployment benefits – a number that was much higher than expected.
And, today, we see that the U.S. economy seems to have taken off during the fourth quarter of 2009, but preliminary findings detail that gross domestic product may have considerably slowed so far for 2010.
In other words, the U.S. consumer is reverting back to an area that suggests the United States economy could be dancing with what economists refer to as a double-dip recession. Add in a report about how banks are lending at levels not seen in 70 years, and those words are turning into reality.
“These numbers are not stabilizing,” says Kathy Boyle, president of Chapin Hill Advisors in New York, to CNBC. “We’re two-thirds of the way through the first quarter and the jobs numbers are worse…I just look at all the signs of these things and I don’t see us getting out of this.”
According to CNBC, Boyle has held a bearish market position since the initial downturn in 2007, and thinks things could get even worse for the economy.
“The news this week should push the [stock] market further down that it is,” Boyle says. “The fact that we’re not down 200 points means there’s still buying interest out there.”
The second reading on fourth-quarter gross domestic product came in better than expected at 5.9%, from 5.7%. On the surface, the new data is promising, however, it also showed that final demand in the economy was benign, rising only 1.9% annualized. This figure was revised down from 2.2%. Excluding exports, final sales to U.S. purchasers rose at a 1.6% annual rate.
Fortunately for the consumer, there is a chance at redemption when the University of Michigan releases its consumer sentiment survey. Wall Street consensus is looking for a number of 74, compared to 73.7 reported last month. Many traders are hoping for an eye-popping number because the markets will need additional octane if they are to bid higher.

“With a plethora of economic data, it’s really hard to say we’re going to have a good read of what the market looks like in the first hour of trade. We could have a tale of two markets here,” said Arthur Hogan, chief market analyst at Jefferies & Co. in New York, to Reuters.
But the report did disappoint, coming in below expectations at 73.6 in February. With consumer sentiment and confidence lower, the outlook for March looks bleak, at best.
“Consumers have been getting more impatient with the slow progress of the stimulus program, and confidence in the Obama administration’s economic policies has begun to want,” Richard Curtin, director of the University of Michigan survey, said in a statement, obtained by Reuters.

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