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Biggest drop in consumer confidence since 09/11

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The Conference Board's February consumer confidence index fell to 64.0 in February, from a fractionally revised lower 78.8 reading in January, marking the biggest drop in consumer confidence since just after the September 11, 2001 terrorist attacks.

Lynn Franco, head of the board's consumer research center said, "Lackluster job and financial markets, rising fuel costs, and the increasing threat of war and terrorism appear to have taken a toll on consumers."

Inside the numbers, the present situation index, which takes a pulse on how consumers feel today, fell to 61.6 in February, which was well below the 75.3 reading from January. The more forward looking expectations index dropped to 65.6 from 81.1.

February's total confidence reading of 64.0 was well below economist's forecast of 77.0 and set the major indexes to their lows of the session, with the Dow Industrials (INDU) 7,756 -1.28% falling to a low of 7,720, while the broader S&P 500 Index (SPX.X) 821.86 -1.28% fell to 819. The tech-heavy NASDAQ-100 Index (NDX.X) 972.68 -2.21% has inched off its session low of 970.

In other economic news, the National Association of Realtors said sales of existing homes rose 3% in January to a record 6.09 million on a seasonally adjusted basis as mortgage rates remained near record low levels. Economists had expected a slight drop- off in existing homes sales to 5.77 million, so today's announcement shows a still steady existing home sales market.

The number of homes on the market rose slightly to 2.27 million, representing a rather tight 4.5 month supply.

The bulk of sectors we watch on a daily basis are broadly red, with sector losers being technology based. The Airlines Index (XAL.X) 27.98 -3.58% leads sector losers and is nearing its 52- week low set on October 10, 2002 of 26.12. Close behind is the Fiber Optic Index (FOP.X) 47.99 -3.53% as it looks to seek out is trending lower 200-day SMA of 45.50. Also weak and just now challenging for this morning's sector loser is the Networking Index (NWX.X) 137.58 -3.58% as it falls back below its trending lower longer-term 200-day SMA of 139.6, which is the first time this index has fallen back below its 200-day SMA since January 8th. Cisco Systems (NASDAQ:CSCO) $13.77 -4.57% is today's volume leader and currently trades right on its short-term 21-day SMA, with the longer-term 200-day SMA of $13.51 offering support.

Treasuries have see some selling come after reaching their highs of the session, with the 10-year YIELD ($TNX.X) 3.790% rising from its 3.755% YIELD lows of the session.

On a near-term basis, traders will be monitoring the S&P 500 Index (SPX.X) for near-term support at the 818.50 level, which is the 80.9% retracement level from our MONTHLY pivot analysis. This morning low has been 818.54 and very close to our MONTHLY S1 level of 819 support. As such, traders holding full position short/put in the indexes may take today's weakness as an opportunity to take some chips off the table, or look to protect gains with a trailing stop at the SPX's WEEKLY S1 of 835.50, which would be just above today's highs of 832.58.

Jeff Bailey

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