Consumer Confidence Infects Investors

(CBS/AP)  Consumers' good mood is spreading to Wall Street.

Stocks surged Tuesday after the Conference Board said consumer sentiment rose in May to the highest level since September. All the major stock indicators jumped more than 2 percent, including the Dow Jones industrial average, which gained nearly 200 points.

The research group's Consumer Confidence Index vaulted to 54.9 from 40.8, soaring past the 42.3 that economists surveyed by Thomson Reuters expected.

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.

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.

"The consumer confidence figure is one that no one really pinned a lot of hopes on as going higher," he said.

Some economists think consumer confidence will be the driving force behind any economic recovery.

"Without consumer confidence stabilizing, there is no growth," Peter Morici, a University of Maryland economist, told CBS News.

Traders are seeing green on their screens on the first day back from a long weekend but the compressed week could still trip up the market. Data are due on home sales as well as the economy's overall output in the first three months of the year, and investors will be eyeing General Motors Corp. as its June 1 restructuring deadline approaches.

According to preliminary numbers, the Dow rose 196.17, or 2.37 percent, to 8,473.48. The Standard & Poor's 500 index rose 23.33, or 2.63 percent, to 910.33, and the technology-laden Nasdaq composite index rose 58.42, or 3.45 percent, to 1,750.43.

The Conference Board's report marked the second consecutive month of large gains in its measure of consumer confidence. Its previous report on April 28 helped reverse a slide in the market that day, and investors appeared heartened that the improving trend was continuing into May.

Stocks dependent on strong consumer spending jumped. Macy's Inc. rose 55 cents, or 4.9 percent, to $11.74, while Best Buy Co. advanced $1.77, or 5 percent, to $36.95. Home builder KB Home rose 80 cents, or 5.5 percent, to $15.44, and DR Horton Inc. rose 46 cents, or 5 percent, to $9.47.

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.

Tech stocks showed some of the biggest gains in part after an analyst raised her rating on Apple Inc. She contends the growth of the company's iPhone device has been underestimated. Apple rose $7.767, or 6.3 percent, to $130.26.

Investors have been questioning whether the stock market's massive two-month rally can be sustained given the continuing weakness in the global economy in areas like housing and unemployment. The Dow is up 26.4 percent from its 12-year low hit on March 9, but even with those gains it's 41.6 percent below its peak in October 2007.

Bill Stone, chief investment strategist at PNC Wealth Management, said some money managers are forced to step in when the news is good just because they are afraid of being left behind and showing poor returns.

"You've still got a lot of people left that really don't want to like this market but may eventually be forced," he said. Stone is encouraged by the skepticism because it could help hold the rally in check.

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.

GM reversed an early slide after it outlined a deal with labor unions, rising 3 cents to $1.46. However the automaker has yet to reach a deal with its major bondholders and is facing a midnight deadline Tuesday for doing so.

In other trading, the Russell 2000 index of smaller companies rose 19.78, or 4.1 percent, to 497.40.

About five stocks rose for every one that fell on the New York Mercantile Exchange, where volume came to a light 940.1 million shares compared with 773.9 million shares at the same time Friday.

Bond prices fell, pushing the yield on the 10-year Treasury note up to 3.50 percent from 3.46 percent late Friday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose 78 cents to settle at $62.45 per barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 rose 1.1 percent, Germany's DAX index rose 1.4 percent, and France's CAC-40 rose 1.1 percent. Japan's Nikkei stock average fell 0.4 percent.

[sjc_1]

"Goldman Sucks and others into RECEIVERSHIP..."

It was Bush and Paulson that made sure Goldman was made whole. They were the ones at the table making sure that the AIG CDS bets were paid to them.

[WayAround]

It's unanimous (at least in these comments).

Nobody believes the bullsh*t numbers.

[jonesjep]

This is the media playing their roll in the Obama administration. During the election they did everything they could to talk down the economy. Now that the economy is the lowest since Carter and 600,000 more people lose their jobs every week they have to try and make their boy look better.

[mcv57]

No doubt, the Obama Economic Advisor's propaganda is doing the Hitler two-shoe step. Watch out, you may get kicked in the head.

The other day, the CBS news claimed the rate of unemployment is slowing down but they never explained why. Perhaps the states were ordered not to take new application for unemployment.

In any matter, unemployment is becoming a way of life for the next 3 years or more. Pretty soon, Obama will call the unemployed 'The unemployable." China will only play this bull-crap for so long.

[whitemale08]

Where are all the nattering ninnies that spend their days on these boards blaming Obama?
Posted by omega39-2009 at 5:09 PM : May 26, 2009 --

Here I am,

I wouldn't be 'blaming' Obama had he not turned to the Dark Side and became a monster for bailing out Goldman Sucks and JP Morgan..

It all makes sense now that I think about it.

If President Obama had did like Lyndon Larouche advised him to do, which was to put these banks like Goldman Sucks and others into RECEIVERSHIP and BANKRUTPCY RE-ORGANIZATION, then there would be no 'campaign-money' for re-election.

So that means Obama has made a political decision based upon the fact that Americans are too broke to contribute any more to elections but Goldman Sucks will still be alive with their billions to put Obama back into office.

The only problem with that thinking, is that the BIG FAILED BANKS are not going to back you, regardless, because by that time Obama will have become so un-popular and mad at the bailouts, that the banks will use that opportunity to back the biggest FASCIST REPUBLICAN since Adolf Hitler.

That way the banksters can keep their loot by beating back hyper-inflation with MASSIVE MASSIVE AUSTERITY CUTS in the budget.

It's funny how when you use 'logic' instead of stastical analysis, your forcasts are more accurate. (I pat myself on the back).

[thinkstrai2]

Wow! Guess I better go "all in" with my severely depleted retirement savings. I've been waiting for the perfect sign and high consumer confidence has to be the beginning of a 4,000 point rally. Or maybe NOT. This is laughable.

[omega39-2009]

Where are all the nattering ninnies that spend their days on these boards blaming Obama?

[debinok1]

One thing this article left out, a very important thing at that, is that this is not an increase in spending. It is a survey of 5,000 people across the US. A poll, nothing more. A very limited poll at that. 5,000 out of 300,000,000 are confident. Not what they make it out to be, and investors are stupid for listening to it.

[debinok1]

This would be the direct effect of the $13 Billion that went out to SS and VA recipients and from those who filed for their tax refunds in March and April. People spent the money on things they needed. Just don't count on it lasting, it will die down again.

[inventagod]

Can you imagine the effect on Americans if Cheney/Bu$h were indicted?