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Consumer Confidence Report Shatters Expectations, SPY Offers Hope

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Rising consumer confidence benefits consumer stocks like KSS and WU

A positive US (SPY)(IVV) consumer confidence report boosted the stocks of consumer firms on March 31. Kohl’s (KSS) gained 2.13%, while Western Union (WU) was up 2.01%. According to the results of the Conference Board’s consumer survey for March, consumer confidence jumped to 101.3 index points in March against a 98.8 reading in February, shattering market expectations of 95.5.

The surge was mainly driven by a rise in the index’s expectations component for the next six months, which was up by 6 points to 96. The March reading was the highest reading for this component in over four years. Improving personal incomes and labor market conditions (salaries and wages) were the key drivers for improving US consumer expectations. The current situations component lost 3 points, falling to 109.1.

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The S&P Case-Shiller home price index offers hope in the face of headwinds

Real estate firm CBRE Group (CBG) gained 6.32%, while homebuilder D.R. Horton (DHI) gained 1.68% on March 31 on positive home price news in the US. The S&P/Case-Shiller home price index for January saw home prices firming in the US, recording a 0.9% rise in January following a 0.9% rise in December and a 0.8% rise in November. The SPDR S&P Homebuilders ETF (XHB) was up 0.03%.

The S&P/Case-Shiller home price index serves as a leading measure of US residential real estate prices, tracking monthly changes in the value of residential real estate in 20 metropolitan regions across the US. The index is tied to a base value of 100 in January 2000.

Looking at the trend, we can see that the rise in home prices has been slower than last year, a welcome trend for affordability. However, the housing market still faces major headwinds in stagnant wages and high mortgage rates. According to David M. Blitzer, chairman of the index committee for the S&P Dow Jones Indices, “Home prices are rising roughly twice as fast as wages.” Moreover, with the Fed determined to hike interest rates anytime this year, mortgage rates can only be expected to rise further.

While US stocks rose on positive consumer readings, the stocks of British companies such as Kingfisher (KGFHY) and Carnival (CUK) gained on positive growth readings. Let’s take a closer look in the next part of this series.

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