May 26, 2009
A more upbeat mood among consumers is spreading to Wall Street.
Stocks jumped Tuesday after a research group reported consumer sentiment rose in May to the highest level since September.
The Conference Board’s Consumer Confidence Index vaulted to 54.9 from 40.8 last month, soaring past the 42.3 figure that economists surveyed by Thomson Reuters were expecting.
Investors watch that indicator closely to get a sense of whether consumers may start shopping more or making bigger purchases such as cars and homes, which could help get the economy going again. Spending by consumers makes up more than two-thirds of U.S. economic activity.
Stocks had opened lower after North Korea reportedly defied the United Nations by firing two short-range missiles after detonating a nuclear bomb underground on Monday. The U.N. Security Council condemned the test.
Jim King, chief investment officer at National Penn Investors Trust Co., said the improvement in consumer confidence surprised investors. With unemployment still high and expected to go higher, many market watchers thought the mood on Main Street would remain gloomy.
“I think the consumer confidence figure is one that no one really pinned a lot of hopes on as going higher,” he said.
In midday trading, the Dow Jones industrial average rose 175.62, or 2.1 percent, to 8,452.94. The Standard & Poor’s 500 index rose 19.27, or 2.2 percent, to 906.27, and the Nasdaq composite index rose 52.60, or 3.1 percent, to 1,744.61.
Stocks dependent on strong consumer spending jumped. Macy’s Inc. (M, News) rose 52 cents, or 4.7 percent, to $11.71, while Best Buy Co. (BBY, News) advanced $2, or 5.7 percent, to $37.18. Home builder KB Home rose 76 cents, or 5.2 percent, to $15.40.
The gains in home builder stocks came as investors shook off a mostly downbeat reading on the housing market. S&P/Case Shiller reported a 18.7 percent drop in its March home price index. The decrease was a little bigger than in February, and slightly larger than economists predicted.
Investors have been questioning whether the stock market’s massive two-month rally can be sustained given the continuing weakness in the global economy. The Dow is still up 26.4 percent from its 12-year low hit on March 9.
After mixed economic data over the last couple weeks, as well as a huge number of stock offerings by banks, the market is likely to stay volatile in the coming weeks, said Steven Goldman, chief market strategist at Weeden & Co. “The market’s had a pretty huge gain here,” he said.
Last week, the major market indexes ended modestly higher, but only after seesawing on worries about the economy and banks.
This week, the market is not only hoping for signs of global stability, but also watching General Motors Corp. (GM, News) as the automaker’s June 1 restructuring deadline approaches. GM is expected to close more plants and force more employee concessions as it tries to avoid bankruptcy court.
On Friday, GM borrowed another $4 billion from the U.S. government, after already received $15.4 billion. GM shares fell 20 cents, or 14 percent, to $1.23.
In other trading, the Russell 2000 index of smaller companies rose 19.02, or 4 percent, to 496.64.
About five stocks rose for every one that fell on the New York Mercantile Exchange, where volume came to 488.3 million shares.
Bond prices fell, pushing the yield on the 10-year Treasury note up to 3.47 percent from 3.46 percent late Friday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 7 cents to $61.60 per barrel on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock average fell 0.4 percent. In afternoon trading, Britain’s FTSE 100 rose 1.1 percent, Germany’s DAX index rose 1.4 percent, and France’s CAC-40 rose 1.2 percent. For further information, visit: http://www.examiner.com/a-2034924~Stocks_jump_after_consumer_confidence_level_surges.html