Several new economic data reports dominated US financial markets Tuesday (May 27). Stock investors seemed to focus mainly on the hopeful reports as all the main stock indices were up firmly on the day. News on the housing markets, consumer confidence, and price changes in oil and retail gas made for a busy Tuesday.

Housing data was quite mixed. Early in the day, the Standard & Poor’s/Case-Schiller national index showed a 14 percent dip in home prices during the first quarter. This means housing prices have returned to levels last seen in 2004. Although many short-term investors and recent home buyers have been suffering, housing analysts still point out that the index is 60 percent higher than it was in 2000 and that the results of the last year are fallback from the overwhelming boom.

Giving hope to the hopeful was the fact that prices dipped a relatively smaller percentage of 4.4 from March to April. More cheerful was the surprisingly strong new home sales report which showed a surge of 3.3 percent for new home sales form March to April. This was the first rise in new home sales in six months. A final bit of good news was found in an inventory report that shows fewer houses on the market, which should be a boost for future home prices.

Despite the hints of good things to come, some analysts were quick to dispel any notions of a market bottom or immediate turnaround. Some went as far as to suggest than any positive indicators from today’s reports are illusions at best. The rise in new home sales from March to April can be partly credited to a downward revision to March’s sales. While it is still positive that April was higher, it is disappointing to discover that March was worse than previously thought. Investors are working diligently to try to determine if market bottom is here in order to get in at bargain prices before the market improves.

Today’s Consumer Confidence Index reading showed American are very nervous about all the economic issues surrounding them. The index dropped for the fifth straight month and is at its lowest level since October 1992. Not surprisingly, housing and gas prices remain at the top of the list of major concerns for most Americans.

Oil prices actually dipped a bit today falling below $129 per barrel. This comes after a late week surge last week that put crude oil futures above $135. Today’s drop was credited to questions as to whether demand is slipping because of the high prices. It seems as though the market may finally be ready to fight back at current price levels.

Retail gas prices managed to eke out another new record as the national average retail gas price hit $3.94 Tuesday. Fuel prices have been driving for $4 for several weeks and seem poised to clear the mark as soon as this week. It is likely, however, that if oil continues to slide this week that gas prices would follow, especially if the dollar has a strong week of trade.

With the data sending mixed signals it is impressive that US equities were strong Tuesday. Investors have remained stubborn, or resilient, for much of the early part of 2008. Buyers continue to ward off bad news and dive in with hopeful news. Housing, gas, and consumer prices seem to hold the keys to the near-term for the US economy and consumer sentiment. Maybe today’s rise in new home sales and drop in inventory are signs of change market sentiment. Could it also be that Americans and businesses are finally ready to say “enough is enough” to oil, gas, and food prices, and to take action?

Market Recap

Stock buyers appeared anxious Tuesday following a day off for Memorial Day on Monday. The Dow closed up 68 points with the NASDAQ and S&P gaining 35 and 9. Oil dropped below $129 per barrel but retail gas touched a new record of $3.94. The consumer confidence index reached its lowest point since 1992. Housing news was mixed as home prices dropped by 14% during the first quarter but new home sales rose 3.3% from March to April.

Neil Kokemuller
Tuesday, May 27, 2008
9:27 PM EST

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.

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