With consumers feeling lousy how long can they spend?
Main U.S. indexes advance; Nasdaq out front, up ~0.9%
Tech leads S&P 500 sector gainers; Energy is sole loser
Dollar up ~0.2%; bitcoin up >4%; gold slips ~0.2%; crude off >2%
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
WITH CONSUMERS FEELING LOUSY HOW LONG CAN THEY SPEND?
With economic data coming in generally strong, U.S. investors have been inclined these days to believe in the idea of a soft-landing or a no-landing scenario, where the U.S. economy sees a very mild recession or avoids one altogether.
Meanwhile, Scott Wren, senior global strategist at the Wells Fargo Investment Institute, sees contradictions in consumer data and is keeping an eye out for deterioration down the road while expecting "acceptable" retail sales data later this week.
On Friday executives at two of the country's biggest lenders, Wells Fargo and JPMorgan, said U.S. consumers remain resilient with solid spending in the third quarter, although they noted signs that higher inflation has stretched some Americans on lower incomes.
On the same day the University of Michigan's preliminary reading on the overall index of consumer sentiment showed it slipping in October with lingering frustration over high prices.
The survey showed sentiment at 68.9 for this month, compared to a final reading of 70.1 in September with economists polled by Reuters expecting a 70.8 reading.
Wren told Reuters the market "hasn't been paying much attention to sentiment data" even though it's been weak.
"It hasn't been good for a while because of inflation. Inflation is moderating, but people see that prices are a lot higher than a few years ago and that their wages haven't kept pace. That's hurt confidence. That's hurt sentiment."
But there's a contrast between the what people are saying and what they are doing.
"Consumers might say they're not feeling all that great, but they've been out spending money at least up till now," said Wren. "Americans that have jobs and money in their pocket, they're going to spend it."
He points to high gas, grocery store and housing prices.
"They don't like any of that stuff. But if they're employed, and by any stretch of the imagination we have a low unemployment rate right now, they have money in their pockets," he said.
"They have to buy food. They have to have someplace to live," he said. "But they're also spending money on discretionary things like restaurants and vacations, all those things that they don't have to do, but they choose to do."
But can this contradiction last?
"So far the higher unemployment rate hasn't dented retail sales that much," said Wren. And Thursday is expected to show September month-over-month retail sales growth of 0.3% after August's 0.1%.
"But there's some downside risk. People have tapped their 401ks. They've tapped savings and home equity loans to fund spending," he said. "That can only go on for so long."
"We think the unemployment rate's going to go higher and that's going to create some headwinds for consumer spending," said Wren. "So we're not expecting strong consumer spending over the next few quarters. We think there's a lot of headwinds out there."
(Sinéad Carew)
*****
FOR MONDAY'S EARLIER LIVE MARKETS POSTS:
CHINA MAY STILL NEED TO PACK ON MORE POLICY INITIATIVES - CLICK HERE
NASDAQ LEADS WALL STREET GAINS WITH TECH IN CHARGE - CLICK HERE
WILL THIS ECHO FROM THE PAST HAUNT THE S&P 500? - CLICK HERE
FIVE REASONS TO STILL WORRY ABOUT INFLATION - CLICK HERE
UK DOMESTIC BANKS ATTRACTIVE DESPITE BUDGET UNCERTAINTY - UBS - CLICK HERE
CHINA’S STIMULUS: HOW MANY TRILLIONS FOR AN EQUITY BOOST? - CLICK HERE
EUROPEAN SHARES MOSTLY HIGHER, UK GAMBLING NAMES TUMBLE - CLICK HERE
EUROPEAN STOCK FUTURES STRUGGLE FOR DIRECTION - CLICK HERE
CHINA STIMULUS GETS MIXED REVIEWS - CLICK HERE
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
