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Stocks Overlook Consumer Confidence Beat as Fed Looms

Stocks Overlook Consumer Confidence Beat as Fed Looms

2019-07-30 16:30:00
Thomas Westwater, Contributor
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Consumer Confidence- Talking Points

  • Consumer Confidence hits 135.7, the highest reading of 2019
  • S&P 500 and Treasury Yields see small lift in response to consumer confidence and pending home sales
  • Markets remain keenly focused on tomorrows Federal Reserve rate decision

US markets are taking a small step back Tuesday morning as the S&P 500 dipped to the 3,000 mark, but stocks are trading marginally higher at 3,013 following the release of the Consumer Confidence data. The US Consumer Confidence survey for July came in above expectations at 135.7, the highest mark of the year for the report. Survey respondents have a more upbeat outlook on business conditions and the US labor market which helped the headline figure rebound from last months read of 124.30, where deteriorating US-China trade talks hindered consumers outlook. Although trade war issues continue to linger, it seems consumers are taking a brighter view on other aspects of the economy and taking a breath from worrying about trade tensions with China. However, while not captured in the survey, tweets from President Trump show that common footing towards a deal may still be far off as Trump said that there are no signs that China is buying agriculture products, which was supposed to be a sign of good faith from the Chinese government.

SPX Price Chart – 5 Minute Time Frame

SPX Price Chart

Pending home sales data was also released Tuesday morning showing a healthy increase of 2.8% on a monthly basis, but a pull back of -0.6% on a year over year basis which missed analyst expectations of 0.7%. Even though data this morning was generally upbeat, the real focus for market participants is the highly anticipated Federal Reserve rate decision where a rate cut is largely expected, with overnight swaps pricing an 81.0% chance of a 25 bps cut and a 19% chance for a 50 bps cut.

DXY Index – 1 Day Time Frame

DXY Price Chart

The US Dollar continues to show strength this year even though the Federal Reserve has shifted into a more dovish stance in recent months, partly driven by inflation figures coming in weak and missing the 2 percent target set by the Fed. As investors search out yield as other major central banks are already into an accommodative cycle, the DXY index is up 2.07% on a year-to-date basis. While a dovish central bank is generally bearish for the country’s currency, it seems to be outweighed by global growth worries coupled with dovish Central banks in respective countries such as the Euro-Zone, Australia, and Japan.

--Written by Thomas Westwater, Intern Analyst for DailyFX.com

Contact and follow Thomas on Twitter @FxWestwater

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