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Economic data inline, but sentiment softens

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This morning's pre-market economic data was pretty much inline with consensus estimates as both the PPI and Core PPI showed very little inflation at the wholesale level. And well it should as later-released Industrial Production and Capacity Utilization numbers still remain at levels of a stagnant economic backdrop. The Industrial Production number showed a decline of -0.1%, while Capacity Utilization showed that 74.2% of the U.S. production capacity was being used.

Consumer sentiment looks to be softening in the early part of February as depicted by this morning's preliminary February University of Michigan consumer index falling to 90.9 from a 93.0 reading in January. Today's 90.9 reading was below consensus of 94.0. The slight decline in this number pushed stocks to their lows of the session on worries that the recent improvement in consumer confidence and spending habit may be waning and therefore dampen near-term bullishness for stocks anticipating economic recovery.

Dow Industrials Chart - Daily Interval

Despite today's New York Times article that Dow component IBM did not disclose the sale of an optical business that may have favorably impacted recent results, the Dow Industrials have held tough at their 50-day moving average.

Shares of International Business Machines (NYSE:IBM) have been under some selling pressure today as the stock traded a session low of $101.70, but have bounced back to the $104 level (-3.69%). IBM along with AT&T (NYSE:T) $15.12 -3.45% are the two stocks keeping the Dow under water, while shares of Alcoa (NYSE:AA) $37.33 +3%, Du Pont (NYSE:DD) +3.03% and Eastman Kodak (NYSE:EK) $29.81 +2.26%, all deep cyclicals, are helping offset the weakness found in IBM.

Jeff Bailey
Senior Market Technician
Option Investor

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