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Pullback in consumer confidence has stocks doing the same

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Stocks were trading higher before this morning's release of Consumer Confidence numbers, but once the report was release, stock underwent some selling pressure as the major market averages dipped into the red.

The confidence index came in at 94.1 in February, which was lower than the expected reading of 97.4 and down from last month's revised reading of 97.8. Today's reading was the indexes first decline in three months.

Today's report showed a consumer that was less confident about the present and less hopeful about the future. Included in the report is the present situation index, which dropped to 94.8 from 98.1, while the expectations index fell to 93.6 from 97.6.

Many economists feel that while confidence suffered a pullback in the recent month, a reading above 90.0 still points to a healthy consumer that is willing to spend in the months ahead. Ian Shepherdson, chief U.S. economist at High Frequency Economics stated, "Expectations are extraordinarily sensitive to movements in the NASDAQ, which fell sharply from early January to mid- February."

Those that rated the current economy as "good" fell from 18.2% to 17.2% while those rating it "bad" rose from 22.4% to 22.9%. That who think jobs are plentiful fell from 18.4% to 17.8% while those that think jobs are hard to get rose from 22.5% to 22.8%. The present situation numbers tends to track the national unemployment rate very closely.

Stocks dip red

Upon release of today's consumer confidence numbers, stocks found some selling, but not extreme levels of selling. The Dow Industrials currently trade down 46 points at 10,100 after reaching a session high of 10,186. After moving back above its longer-term 200-day moving average yesterday, the Dow Industrials (INDU) did fall below this key moving average (10,044) for a brief period of time to the 10,033 level.

Pentagon disputes Fox news report

Not long after the consumer confidence numbers were released, Fox news reported that U.S. Special Forces were on the ground in Iraq and this had stocks seeing some further selling pressure.

In the market monitor, we quickly looked at Crude Oil Futures and many "defense" related stocks trying to seek out any divergence that we might expect from these securities and could find no meaningful action to the Fox news reports that the MARKET may be trading on. Not long after, the Pentagon issued a statement denying any military action by the U.S. in Iraq.

From there, stocks recovered somewhat from their worst levels of the session.

Sector strength is limited at this time with the Gold/Silver Index (XAU.X) trading up 2.54% at 65.15 and Airlines (XAL.X) trading higher by 0.91% at 95.17. Sector weakness shows marginal declines of less that -1.0% among many technology sectors, with the Combined Telecom Index (IXTCX) leading sector weakness with a -1.28% decline at 167.70.

Jeff Bailey
Senior Market Technician
Option Investor

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