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Bleak January US Consumer Confidence Helps Drag Stocks Lower

Bleak January US Consumer Confidence Helps Drag Stocks Lower

Rich Dvorak, Analyst

Talking Points:

  • US Consumer Confidence Index Declines in January to lowest level since July 2017
  • All components of the survey worsened, including outlook on the labor market
  • The US stock market is moving lower following the report

The S&P500 Index started selling off after January’s Consumer Confidence Index came across the wires this morning. The indicator declined for the second consecutive month as a plethora of ongoing risks paralyze the consumer. Consumer Confidence was also reported lower than expected for the second month in a row with the gauge clocking a reading of 120.2 compared to Bloomberg’s survey median of 124.

US S&P500 INDEX PRICE CHART: 1-MINUTE TIME FRAME (JANUARY 29, 2019 INTRADAY)

US S&P500 Index Price Chart After US Consumer Confidence Index Released January 2019

Although US Consumer Confidence has shown a rapid deterioration from its recent high of 137.9 in October, the metric remains at a relatively elevated level. Since then, risk assets have taken a beating as investor angst and tightening financial conditions spill over to consumers which adversely impacts economic optimism.

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Notable from the report’s release was the sharp drop in consumer optimism about business conditions over the next six months. The report states that “the percentage of consumers expecting business conditions will improve over the next six months decreased from 18.1 percent to 16.0 percent, while those expecting business conditions will worsen increased from 10.6 percent to 14.8 percent.”

US CONSUMER CONFIDENCE INDEX PRICE CHART: MONTHLY TIME FRAME (JANUARY 2013 TO JANUARY 2019)

Monthly US Consumer Confidence Index Price Chart

Another component of the report that worsened was outlook on the labor market which is particularly striking since the job market has been one of the most robust segments of the US economy. Although, current conditions were little changed as the percent of respondents claiming that business conditions are bad declined from 11.6 percent to 11.1 percent.

While the January Consumer Confidence Index is likely attributing to the selloff in stocks this morning, other factors such as subpar corporate earnings and upcoming event risk from the Fed and US-China trade talks this week could also be dragging sentiment and stocks lower.

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Written by Rich Dvorak, Junior Analyst for DailyFX

Follow on Twitter @RichDvorakFX

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