There’s no telling where we will close on this last day of September. The major indices opened in the green, then immediately traded lower, only to reverse back to the upside by mid-morning. Poor inflation and unemployment data out of Europe this morning drove the value of the Euro down another 0.75% against the dollar to $1.26. Also in Europe, prices are up just 0.3% in the year to September, which is the lowest recorded in five years. In Asia, Hong Kong’s pro-democracy protests are gaining momentum as these demonstrations which are being led by China's youth, could get even more dramatic tomorrow when most of China celebrates its national day. War concerns remains light in Iraq/Syria and Ukraine/Russia today, so the big market movers are our own economic data (for a change). There were three major releases this morning, although the results, like the market’s movements, are mixed.

Firstly, Case-Shiller with Standard & Poor’s released their index of home prices for the month of July. Seasonally-adjusted home prices contracted in the month, down 0.5% for the third straight decline and the steepest decline in Case-Shiller’s seasonally adjusted data going back to November 2011. This reading was far below the 0.1% gain expected for July. Year-over-year the prices have been steadily coming down all year long to +6.7% in July (the lowest reading increase since November 2012) and down sharply from the 8.1% increase from June. Fourteen of the 20-city sample showed declines in July with Chicago and Minneapolis showing the most severe declines, at -1.6% in the month. Three cities show no change leaving three with gains led by Las Vegas at only +0.3%. Unadjusted data tells a similar story, but index reading itself is showing some progress over time. The chart below shows that in July, the non-seasonally adjusted composite index came in at 173.34, up from the 172.33 in June. Though the index reading increased, the growth is decreasing, and this is the discouraging part. The eroding of home prices is a negative for the wealth of individual home owners, but it’s a positive for those looking to buy.

Next, the Windy City’s economy is showing some slowing in September as the Chicago PMI slowed to a composite index reading of 60.5 versus the robust 64.3 in August – but we note that this reading is still very strong. While details of the PMI report are not made public, the summary notes a slowdown in productions, backlog orders and new orders. Inventories jumped in September to a 41-year high which the report attributes to strong demand and longer lead times. Raw material prices also are showing their highest rate of monthly growth since November 2012, and the employment component is noted as “steady and soft.” Despite a slowdown in some areas, this report points to solid industrial expansion not just in Chicago, but potentially in the rest of the US.

Lastly, the Conference Board released their September reading for consumer confidence. In the month, confidence made a reversal falling to 86.0 from August’s revised recovery-high of 93.4. Unfortunately, the reading fell way below the consensus number of 92.5 – which also expected a decline in sentiment. Weakness was centered on the expectations component, which as the chart below shows was quite high for the three months prior, as consumers lost confidence in the economy and the jobs outlook. The current conditions component wasn’t much better, citing that fewer consumers describe their current jobs as plentiful and rewarding (15.1% for the month versus 17.6% in August). The report notes sizable declines in auto and home purchasing plans on the part of consumers, but weakness definitely isn’t due to inflation or rising gas prices, so delayed plans remain curious to economists. Both the University of Michigan’s report, but especially the Conference Board’s report, point to easing confidence in current conditions, which we believe may actually hit towards some weakness for the September jobs data that will be released on Friday.