The stock market witnessed a strong morning start, and positive economic data released early this morning could be a driving force leading the stock market’s rally this morning.
Consumer Confidence Index for July rose this morning by 7.3 compared to June’s revised index of 105.3 to 112.6. The level has reached a six-year high as conditions in the job market and business have improved.
As the confidence level increased, the Commerce Department reported that consumer spending rose by 0.1 percent in June. The minimal change in June might signal a potential cooling off in spending, as the change in personal income has been relatively steady at 0.4 percent over the previous months.
This cool off in spending has helped drive consumer saving levels higher. While consumer income rose, the core personal consumption expenditures level, which includes durables, nondurables, and services, rose by 0.1 percent behind a forecast of 0.2 percent.
“The consumer economy, once again, remains on a firmer footing than it has generally been given credit for,” said Richard DeKaser, chief economist at National City Corp. (NYSE: NCC), in a statement on Bloomberg.com. “Even in spite of the pause in spending, we will see them come back”
The housing markets continue to experience woes as the construction spending level in June changed by negative .3 percent. In May the spending changed by almost 1 percent but was unable to carry into June.
According to CNBC.com, Phil Dow, director of equity strategy at RBC Dain Rauscher, said, “My suspicion is we’re not over the subprime woes. My guess is there will be further hurdles to come, but by and large, the trend is up in my opinion.”
Even with the tumble in construction spending, the other economic indicators helped provide stability and reassurances in the markets. The housing market, which has been having a terrible year, can stumble without the market panicking because consumers are used to the troubles facing this sector.
Sal Guatieri, senior economist at BMO Capital Markets in Toronto, stated on Bloomberg, “Once housing stabilizes, we’ll see overall construction spending pick up. A stabilization in housing isn’t going to happen until early next year.”
Even with the market taking a brutal beating last week, the market’s great start this week as it tries to regain its footing shows that there is a lot of volatility still in the market. The overall feelings generated from the economic numbers are positive, but investors should continue to watch out for potential swings in the market.
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