There are a lot of contradictions to the market, economy and consumer sentiment. According to Gallup, confidence in the economy plunged in the past week…

…and yet the confidence reading from the Conference Board came in at the highest level since October 2007.

As it stands now, consumer confidence still has a long way to go to get back into sync with the stock market. Initially, the Street cheered the number and the positive start to the session got an extra boost then it all vanished. Clearly there’s anxiety in the air: part of it comes from the logjam of news, including the Fed and jobs report, coupled with the nose-bleed levels of the market.

We actually like these lulls a lot: it’s a test of the resolve of investors, giving nervous shareholders a chance to blink and run, but they continue to resist, or pass, the test.

By Jennifer Coombs, Research Analyst

What began as an optimistic rally this morning faded rather quickly by mid-morning as there was some knee-jerk selling on headlines that that the European Union (EU) has reached an agreement on new economic sanctions against Russia that will go into effect by Thursday. The imposition of new sanctions may arouse concerns about a boomerang effect on the global economy, and Europe in particular, which significantly depends on Russia as a major trading partner and major supplier of natural gas. Most disturbing of all were the European bond yields, many of which have hit multi-century lows today (yes, you read that correctly);bonds are moving in a way that doesn't exactly imply much faith in the economic growth outlook. The tech-heavy NASDAQ is holding on stronger than its peers at the moment, largely due to positive earnings results, but also that the EU agreed to curb the businesses of some Russian banks and the exports of some technology companies. Nevertheless, we would like to point out that there will be no shortage of volatility for the rest of the week – tomorrow morning we will get a read on how the US GDP fared in Q2-2014. However, today there was also no shortage of volatility thanks to several economic releases.

Firstly, the S&P/Case-Shiller home price index (delayed by two months) which tracks monthly changes in the value of residential real estate in 20 metropolitan regions across the US, noted that home-price appreciation is slowing at a rapid pace. As a matter of fact, the reading actually showed a reversal in May, with a seasonally adjusted -0.3%. It’s discouraging since this is the first negative reading since 2012. However, this isn’t overly concerning since we already knew that May was a weaker month and we’ve begun to see progress in other areas of home buying from back in June. Year-over-year, both adjusted and unadjusted, home prices are at +9.3%; down substantially from +10.8% and +12.4% in the two prior months. When you breakdown the readings for all 20 cities, 14 of the cities were in the red during the month of May. Atlanta shows the steepest monthly decline, at -0.9%, followed closely by Chicago and San Francisco. However, the unadjusted data are followed in this report and show deceptive strength, at a monthly +1.0%; this reflects seasonal strength from the spring months for housing after a horribly cold winter, and is not a sign of pricing power.

Ultimately, softness in home prices reflects the underlying weakness still apparent in the housing sector, which is having a bad year after quite positive results in 2013. The S&P/Case-Shiller home price index report definitely confirms the weakness seen in last week's FHFA home-price report. Below is the monthly composite index reading as well as where the two home tax credits occurred.

On a slightly lighter note, the ICSC-Goldman Store Sales showed a recovery over the previous week. Sales were mostly boosted by early back-to-school shopping as the index rose 0.2% from the prior week. Year-on-year rate has hit major turbulence (as indicated in the later portion of the chart), now at +4.6% versus the +2.8% and +4.5% readings in the prior two weeks. Additionally, the report highlighted "impressive" strength at department stores, apparel stores and electronic stores, the report describes July, as a whole, a positive month.