Cooler than scorching: Consumer confidence, Case Shiller

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Nasdaq up more than S&P 500; Dow slips

Tech leads S&P sector gainers; energy falls most

STOXX Europe 600 index down ~0.8%

Dollar dips, crude oil off >4%; gold, bitcoin higher

U.S. 10-Year Treasury yield drops to ~3.72%

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Market participants were in the mood for a glass of something cool on Tuesday, after the PCE heatwave on Friday - along with a possible debt ceiling deal, swung the pendulum in favor of yet another Fed rate hike next month.

Tuesday's data, while not exactly cool, was at least a bit less scorching.

The mood of the American consumer dipped a bit in May, but not by as much as economists predicted.

The Conference Board's Consumer Confidence index USCONC=ECI shed 1.4 points from an upwardly revised April number to deliver a print of 102.3, 3.3 points to the north of consensus.

Beneath the headline, the "current conditions" component inched 0.3 point lower, while "expectations" cooled by a negligible 0.2 point.

But assessment of business conditions ticked a bit higher.

"Consumer confidence declined in May as consumers' view of current conditions became somewhat less upbeat while their expectations remained gloomy," writes Ataman Ozyildirim, The Conference Board's senior director of economics.

The gap between current conditions and expectations remains wider than normal, a phenomenon recession watchers have noted often acts as a harbinger to economic contraction:

But surveys don't always reflect behavior.

Friday's PCE report showed consumer outlays surged at twice the rate expected, even as the saving rate - a gauge often associated with consumer expectations - dropped 40 basis points to 4.1% of disposable income.

Add to that mix the soaring revolving credit outstanding - more than $1.2 trillion at last glance - and we have a portrait of an American consumer that's growing more worried about the future, but saving less and charging more.

That's a state of affairs that can't go on forever:

Pivoting over to the housing market, home prices are finally cooling down, having been on fire since the global pandemic sent buyers stampeding for the suburbs.

The year-on-year S&P Global Case Shiller 20-city composite USSHPQ=ECI landed at -1.1% in March, marking the index's first annual decline in nearly 11 years, though not quite as steep as the 1.6% decline analysts expected.

On a monthly basis, the composite showed a 0.5% gain while consensus saw it moving sideways, unchanged.

The sector has been caught in multiple crosswinds of late, in the form of rising mortgage rates, low inventories, solid housing starts/new home sales data and brightening home builder sentiment.

So have U.S. home prices stabilized?

"The challenges posed by current mortgage rates and the continuing possibility of economic weakness are likely to remain a headwind for housing prices for at least the next several months," says Craig Lazzara, managing director at S&P Global.

City-by-city, 12 of the 20 cities in the composite showed home prices are down from March 2022, with San Francisco and Seattle down by double digits, 12.4% an 11.2%, respectively.

Miami and Tampa enjoyed the largest year-on-year gains.

Here's the 20-city composite mapped against demand for loans to purchase homes, thoughtfully provided by the Mortgage Bankers Association.

It should be noted that applications for purchase mortgages are currently down about 29.4% from a year ago:

(Stephen Culp)



While a bipartisan deal to raise the $31.4 trillion U.S. debt ceiling awaits its first test in Congress on Tuesday, Sam Stovall, chief investment strategist at CFRA Research is looking into what might happen to stocks next.

Now Stovall points out that "the extreme fringes of both parties" need to vote to support agreement. Ultimately he believes it will be approved before the revised "drop dead" date of June 5 when the United States would run out of money to pay its bills.

But even as Stovall wonders which stocks will benefit from the lifting of the dark cloud that has caused much anxious discussion among investors in recent weeks and months, hesays it's not a given the market will have rally from here.

To be sure, the strategist notes that "in reaction to the aroma of an agreement, the S&P 1500 jumped 1.3% on Friday," with upside in all sizes and styles, 8 out of 11 sectors and growth-oriented communication services, consumer discretionary, and information technology groups leading the way.

But, "the broad-based single-day price advance did not undo the damage done earlier in the week" with 27% of sub-industries ending the week above 10-week and 40-week moving averages versus 41% for the week ended May 19, said Stovall.

"This dwindling participation rate might be signaling that tough times lay ahead," according to the strategist even as he points to an S&P 500, which is ~2% away from a 20% recovery from it Oct. 12, 2022, low, which would indicate the start of a new bull market.

It could be due to the higher-than-expected readings for consumer spending, durable orders, Q1 GDP, and personal consumption expenditures (PCE) last week as stickier inflation may point to a Federal Reserve that's not done with rate hikes.

So "while there might be “no swoon in June”, the odds don’t favor a solid performance, either," says Stovall.

(Sinéad Carew)



U.S. stock index futures were higher early on Tuesday after President Joe Biden and Republican House Speaker Kevin McCarthy on Sunday signed off on an agreement to temporarily suspend the debt ceiling.

Nasdaq futures led the gains, with the market extending last week's late rally tied in part to a rally in chip stocks and a strong forecast from Nvidia NVDA.O

A House committee is set to meet later Tuesday to discuss the deal, which also includes capping some federal spending. Congress has days to approve a package to avoid a U.S. default.

S&P 500 e-minis EScv1 were up about 0.6% while Nasdaq 100 e-minis NQcv1 were up more than 1%, extending last week's strong gains.

Here is the premarket snapshot:

(Caroline Valetkevitch)



Futures early trading

Consumer confidence

Consumer dashboard

Case Shiller


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