On a day filled with the news of President Obama’s selection of Judge Sonia Sotomayor to be his Supreme Court nominee, California’s Supreme Court decision on same-sex marriage, and of North Korea’s launch of two more short-range missiles even after conducting an underground nuclear test on Monday, the U.S. economy received relatively little notice.
Yet it should have.
For the “glimmers of economic hope” continue to get brighter.
As usual, before proceeding, reader beware:
For professional and reliable economic and financial information and advice—albeit probably (very) depressing—please consult the real experts, here or elsewhere.
For rumors and “wishful” thinking on how our economy is failing, going to hell in a hand basket, please listen to Rush Limbaugh.
(By the way, Mr. Limbaugh today added the Supreme Court Justice nominee to his tired “I hope he or she fails” wish list.)
According to Bloomberg.com, “U.S. stocks jumped, sending benchmark indexes higher for the first time in five sessions, as the biggest gain in consumer confidence since 2003 spurred optimism the worst of the recession is over.”
The Dow Jones Industrial Average increased 196 points, or 2.4 percent, to 8,473. “Eleven stocks gained for each that fell on the New York Stock Exchange, the broadest rally since May 18.”
The Russell 2000 index of small companies rose 4.8 percent for the steepest advance since April 9.
The S&P 500 added 2.6 percent climbing to 910, representing a surge of 35 percent from a 12-year low on March 9 “on speculation the global recession is easing and as earnings at companies from Ford Motor Co. to Wells Fargo & Co. beat analyst estimates.”
What was behind all this good market news?
According to Bloomberg.com, “Confidence among U.S. consumers jumped in May by the most in six years, fueling speculation the economy will recover later this year.” “The 28-point jump in confidence over April and May is the biggest two-month rally since records began in 1967.”
According to MSNBC.com, “Investors watch the indicator for signs of whether consumers might start shopping more or making bigger purchases such as cars and homes. Spending by consumers makes up more than two-thirds of U.S. economic activity.”
According to the Wall Street Journal, “The Conference Board said its index of consumer confidence for May jumped to 54.9, the highest reading since September, from 40.8 in April. Expectations for economic activity over the next six months jumped to 72.3 from 51.0 in the prior month.”
Yes, continuing high unemployment and falling real estate values are still with us. But, according to Jim King, chief investment officer at National Penn Investors Trust Co., 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. “The consumer confidence figure is one that no one really pinned a lot of hopes on as going higher,” he said, according to Bloomberg.com.
And more fallout from the unexpected dramatic rise in consumer confidence, all according to Bloomberg.com:
* “Pent-up demand is increasing each passing day as reflected in these confidence numbers,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. “But there is a funny dynamic going on as people are waiting. The turn will come when there is a sense that we have passed the bottom,” which Behravesh said may happen as early as August.
* Americans’ spirits are lifting as stock prices rebound, mortgage rates fall and perceptions grow that the job market may not get much worse
* “We’re certainly moving in the right direction,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “We expect to have positive economic growth in the third quarter. The job declines will fade.”
* The confidence report showed the share of Americans planning to buy a car in the next six months rose to the highest level since April 2008, and those looking to purchase a large appliance rose to an eight-month high. The outlook for home purchases fell.
*The share of consumers who said more jobs will be available in the next six months climbed to 20 percent, the most in more than five years. The proportion of people who said they expect their incomes to rise over the next six months rose to 10.2 percent from 8.3 percent.
* “As far as consumers are concerned, the worst is now behind us,” Lynn Franco, director of the Conference Board’s consumer research center, said in a statement.
Not bad for a day when those “glimmers of economic hope” were overshadowed by so many other developments.
