Consumer confidence for February fell to 46.0 from 55.9, which is below the December consumer confidence level of 53.6. Analysts expected this dip due to a lower consumer sentiment index earlier this month. Both the S&P 500 and the Dow Industrials traded lower once the consumer confidence number was released as well as commodities (Gold, Silver, Metals) and energy (Crude, Natural Gas).
Consumer confidence is the level of consumer attitudes towards the overall state of the economy. The level of optimism effects both the stock and bond markets as investors, manufacturers, retailers, banks and government agencies use the consumer confidence number to plan their actions. It gives an indication of new purchases that would be made by the consumer.
If consumer confidence is lower than expected then manufacturers will anticipate consumers reducing purchases and they will cut down on their current inventories than producing new ones. Government will incorporate lower future tax revenues when deciding on future projects. Businesses will adjust operations on anticipation of reduced consumer spending.
If consumer confidence is higher than expected then manufactures will increase production and inventories to accommodate future demand from the consumer. Government will expect improved tax revenues. Businesses will adjust operations to gauge the willingness of consumers to make new purchases and increase hiring rates.
Equities to watch on these numbers include: aerospace and defense, retails, construction, materials, energy stocks, and consumer discretionary items.
Tomorrow expect mortgage applications, new home sales, petroleum report, and Ben Bernanke to move the markets.
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