10/25/2011
By David Urani, Research Analyst

The market was off to a rocky start, and then it got stung out of nowhere by a terrible report from the Conference Board on consumer confidence. The confidence index for October plunged to a dismal 39.8 from 46.4 in September. Folks, this is the lowest the index has been since March 2009 (which you might recall was when the market hit its lowest point of the recession). The decline was driven by a drop in consumer expectation which were also the lowest since March 2009.

The result is surprising to be sure, as there have been a number of other data points suggesting October was an improvement over September economically speaking. But thinking back, I recalled that the University of Michigan's preliminary October sentiment report was also a downer.  It too fell from September to October as Expectations fell to the lowest point since 1980. When the Michigan number came out, I remember sort of brushing it aside as an anomaly because it was a preliminary estimate and I expected it to be revised higher. Now that the Conference Board has reaffirmed the University of Michigan, there is reason to be on alert.

Looking back at some of the details from the Michigan report (Conference Board gives few details), income declines and expectations of no income increases were both at record highs. So clearly, weakness in the jobs market must have something to do with it. My inclination is to think that businesses cut back on growth plans amid the European chaos, and that resulted in cutbacks on jobs/wages.

There is more of this story yet to unfold and we will have an eye on it.

David Urani
Wall Street Strategies