Conference Board Reports Sink Stocks
Two separate Conference Board Reports served to sink stocks today. Despite covering diverse issues, Conference Board reports on China and US consumers led investors to the exits.
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Conference Board Reports Sink Stocks
Two critical catalysts served to send stocks sharply lower today, and while covering diverse issues, they originated from the same source. The Conference Board produced two reports that each pointed investors toward the door. At the hour of publishing, stocks were down near 3%.
The Conference Board, a private research group, revised its April Leading Economic Index for China lower, to growth of 0.3% from the initially reported +1.7%. There was no new data that influenced the report; instead a calculation error was to blame for the sharp change. The error in question was a one-time mistake, and so no revisions to previous data were required. Still, a market that had been enthused by the last reported Chinese LEI now needed to digest this dramatic change in reality.
The Conference Board's China LEI aggregates six effective leading indicators for China's economy, and the Board believes the Index is therefore a valid metric for the measurement and forecasting of the Chinese economy. The market concurs, as evident by its reaction to the change in investor sentiment this morning. Stocks opened gap lower.
Helping stocks on their way lower, an LEI economist further dampened any China driven enthusiasm. As reported by the Conference Board, Bill Adams, resident economist for The Conference Board China Center in Beijing said: "The rising trend of the LEI has been moderating since the middle of last year, suggesting there is no strong basis for assuming accelerating growth. The majority of LEI components have been increasing, but consumer expectations fell in April and new export orders have been weakening for most of the previous six months."
China has been both an indicator of US and global economic demand, and more recently a driver of it, as its own domestic economic growth finds traction. Thus, this home to so many of the world's citizens plays an intensifying and currently critical role in global economic activity. This is to say that market concern is justified. (Interests: Nasdaq: ASIA, Nasdaq: PRASX, NYSE: PUA, NYSE: NWD, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: SOLF, Nasdaq: CSUN, Nasdaq: BIDU)
Speaking of consumer expectations, the Conference Board also released its US Consumer Confidence Index today. What resulted was a surprise for the market and economists alike. June's Consumer Confidence Index fell precipitously to a reading of 52.9, from 62.7 in May. Economists were looking for a reading of 63.3, based on Bloomberg's survey. So where the experts expected growth, we instead discovered horror.
The Present Situation Index fell more than four points, to 25.5. However, the Expectations Index dropped more than 13 points to 71.2. The survey found that views on business conditions and the labor market both declined in June. Moreover, the view for the next six months dropped on these measures as well.
As consumers represent the drivers of the American economy, the rug was pulled out from under the market and its gurus. While Wall Street Greek has pointed to the ongoing weakness in housing and the labor market, as well as declining rates of consumer spending growth against more normal comparables, the gurus on the street have simply chimed the tune of the day. Where we look with an independent lens toward the future, the experts do not place their big salaries in jeopardy by predicting against current trend. So keep reading... (Interests: NYSE: WMT, NYSE: JCP, NYSE: M, NYSE: CHS, NYSE: TGT, NYSE: JWN, NYSE: AEO, NYSE: ARO, NYSE: LTD, Nasdaq: COST)
A decreasing number of economists and strategists will sing the company song as economic data and corporate results begin to reflect a harsh economic reality. We hope you will remember us then, as many of our long time readers remember us when we warned ahead of the financial crisis. Our views against homebuilders and the financial sector proved true, and many of the companies we favored for shorting no longer exist. More recently, we even earned readers a double-digit paper return on Toyota shares (NYSE: TM), with the bottom set at the perfect center of our price target range. In years past, we called the bottom on oil prices to the hour, from which oil rose from the $40s to near $150 a barrel.
We're planning an interesting article now on the two dire economic consequences policy makers must decide between, and we think you will find it interesting, if not terrifying. Stay tuned to The Greek for your financial market insights and more.
The Day's Corporate News Drivers
Oppenheimer's Consumer, Gaming, Lodging & Leisure Conference kicks off, and it highlights presentations from Burger King (NYSE: BKC), DSW, Inc. (NYSE: DSW), Jarden (NYSE: JAH) and McCormick & Schmick's (Nasdaq: MSSR). Look for Cell Therapeutics' (Nasdaq: CTIC) shareholders' meeting and earnings reports from General Mills (NYSE: GIS), Sealy (NYSE: ZZ), Advanced Photonix (AMEX: API), Exfo Electro-Optical Engineering (Nasdaq: EXFO), FNB United Corp. (Nasdaq: FNBN), Omnova Solutions (NYSE: OMN), Parlux (Nasdaq: PARL), US Dataworks (Nasdaq: UDWK) and Worthington Industries (NYSE: WOR). Monday's news included Duke Energy's (NYSE: DUK) presentation at the Duke Energy International Informational Conference. CarMax (NYSE: KMX) held its annual shareholders meeting, and the earnings schedule included news from SMSC (Nasdaq: SMSC), Zep, Inc. (NYSE: ZEP), Aero Grow International (Nasdaq: AERO), Barnes & Noble (NYSE: BKS) and Micron Technology (NYSE: MU).
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