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Sharp decline in US consumer confidence rattles already nervous investors

US stocks, which enjoyed a huge rally on Wednesday, were trading sharply lower after Thursday's data, with the S&P 500 index down about 1.8 per cent

Reuters  |  Washington 

A trader works on the floor of the New York Stock Exchange  on Wednesday | Photo: Reuters
Photo: Reuters

A measure of posted its sharpest decline in more than three years in December, rattling investors already nervous about the prospect that a global was spilling over into the United States.

In a sign households were growing more worried about the economy, the Conference Board on Thursday said its index fell this month by 8.3 points to a reading of 136.4, the largest one-month drop since July 2015.

Other data released by the Labor Department, however, showed the number of new applications for jobless benefits dipping in the latest week.

US stocks, which enjoyed a huge rally on Wednesday, were trading sharply lower after Thursday's data, with the down about 1.8 per cent early in the afternoon. Prices of US Treasuries were higher, while the US dollar was weaker against a basket of currencies.

US stock prices have plunged in December as investors worried the US could face headwinds due to the global Adding to those concerns on Thursday was data showing earnings at China's industrial firms dropped in November for the first time in nearly three years.

Whipsawing financial markets could lead to further drops in consumer confidence, which could eventually make consumers more shy about spending, said Stephen Stanley, chief economist at Amherst Pierpont Securities.

"It will definitely be worthwhile to keep a close eye on the various measures of consumer attitudes," Stanley said.

The drop in in December was mostly fueled by falling measures of expectations, with more people expecting jobs will become more scarce.

LABOR MARKET STRENGTH

The labor market, however, appears to still be strong. Initial claims for benefits dropped 1,000 to a seasonally adjusted 216,000 for the week ended Dec. 22, the reported.

Initial claims have now fallen in three of the last four weeks and are just above the 49-year low of 202,000 reached in the week ended Sept. 15.

After several years of near-steady falls, claims trended higher between mid-September and mid-December, prompting concern the U.S. was losing momentum.

It remains unclear how much of that increase was related to the difficulty government statisticians have in adjusting the claims data for seasonal swings. Economists polled by Reuters had forecast claims increasing to 217,000 in the latest week.

The latest claims data "signals improvement in the labor market relative to a few weeks ago, but softening in conditions relative to a few months ago," said Daniel Silver, an economist at JPMorgan.

Worries about the have also been stoked by signs of weakness in the housing market.

US home prices rose just 0.3 per cent in October, leaving the year-over-year increase at 5.7 per cent, the smallest gain in more than two years, data from the US Federal Housing Finance Agency showed on Thursday.

A report on new home sales in November will not be released on Thursday as previously scheduled due to a partial shutdown of the federal government.

The Federal Reserve raised interest rates last week for the fourth time this year, but forecast fewer rate hikes next year and signaled its tightening cycle is nearing an end in the face of financial market volatility and slowing global growth.

First Published: Thu, December 27 2018. 23:21 IST
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