Wednesday, August 27, 2008

Consumer Confidence, Gustav, The Fed, and Low Volume - Durable Goods Orders Point To Higher Open

On Tuesday, the markets ended mixed on a day where consumer confidence, Gustav, and the Fed seemed to be the talk on the street. After spending the day in positive and negative territory, the Dow Jones finished 26.62 points higher. The S&P 500 added 4.67 points, and the NASDAQ fell 3.62 points.

The day started with the consumer confidence report coming in at 56.9 for August versus 51.9 for July. Most economists attributed this rise to the falling energy prices that helped the consumer. This was not a great number, but it was a positive over last month. The main worry for consumers seems to be job concerns in the current economy.

Hurricane Gustav and its projected path to the Gulf of Mexico brought on a rally in oil and natural gas. This spurred on energy stocks for the day. Oil finished the day up $1.16 to $116.

The Federal Reserve's Open Market Committee minutes were released today from the August 5 meeting. The minutes point to a Fed that is worried about weak growth and higher energy prices. As we have said in previous posts, the Fed can be patient because while inflation is a concern, a hike in interest rates would further slow this economy. Most economists believe that the next move will be higher for rates, but the timing and the number of rate hikes are in question.

As we pointed out yesterday, this week will probably be very light on the trading floor but busy with news. Tuesday's number was somewhat equal to Monday on the New York Stock Exchange with 856 million shares traded, and on the NASDAQ with about 1.44 billion shares traded versus an average of 2.17 billion.

Wednesday's lone economic data report was the durable goods orders report that is a preliminary measure of the manufacturing activity. The Commerce Department says orders for durable goods jumped 1.3% in July compared to the previous month, led by a big jump in demand for commercial aircraft. Orders for durable goods, which includes cars, appliances and machinery, had been expected to rise by only 0.1%, according to economists surveyed by Thomson/IFR.

Durable goods are under scrutiny not only because they reflect business spending, but also because they are an indicator of consumer confidence.

Sources: CBS Marketwatch, Reuters, Associated Press

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