Today's Consumer Confidence Data Created Some Turmoil in the Markets, Signalling That Consumers Are Not Too Confident. Is There Cause For Concern?

MARKET SYNOPSIS

The consumer confidence data is out and investors feel the disappointment. Publishing the data affected numerous activities within the market. From the housing market to the technology and science market, investors are seeking for market strength. In the science sector there is number of companies that are seeing significant gains to their stocks. While consumers do not fear inflation, the dollar grows stronger but gold suffers a decline. Also, making directional bets on the housing market behavior is now easier than ever before due to some new ETFs. Lastly, billionaire George Soros stated that high rates will choke the recovery growth.

Consumers not so confident

The consumer confidence data is affecting investors’ momentum, and causing stocks to decline. Consumer confidence poll from the conference board indicates that the general public is not expecting the economy to recover anytime soon. It is difficult for a lot of consumers to be confident of the recovery, when they do not have jobs, loosing their houses, and can not get loans from banks. The consumer confidence poll does not mean that consumers think things will get worse, instead it states the level of confidence people have of the recovery strength. This report shows that there are fewer people wanting to buy houses, cars and major appliances, than shown by the previous report in May.

Also, the commercial housing market is suffering a decline, while the science and technology market is seeing a gain. All of the sectors, except energy, fell .8% according to S&P. There is a month-to-month report on prices of homes on 20 selected cities that indicates a .6% loss as of April; however a month to month basis is not a good indication of where the market is at. A year to year trend is most sufficient to analyze the market behavior. Nevertheless, it is believed that the housing market has not seen the bottom. Why hasn’t the commercial housing market seen the bottom yet? If you ask an accountant he will tell you that in order to see the actual price of houses, due to the declines, the banks will have to write-down their prices on their accounts. This write-down will cause the banks to report huge losses, consequently causing banks to feel the pressure of bankruptcy. So what are banks doing right now? They are holding back some of their foreclosed homes, and not pricing them at a fair price for our current economic stage. To view the consumer confidence graph visit http://www.conference-board.org/economics/ConsumerConfidence.cfm

Chocking recovery

Billionaire George Soros stated that fears of inflation will cause interest rate to rise, consequently choking the economic recovery growth. Investors can not expect the market to function the way it did before the economic crisis started. The desire to continue where they left off, is an sign that this economic crisis can happen again. Also he stated that the government should have not supplied banks with bailouts, and stimulus spending. These government decisions cause the U.S. Treasury bill to rise, driving mortgage rates to rise as well. So how does the Federal Reserve end this 18 month recession without inflation? By not making the same mistakes, George Soros feel that regulators will never make the right decision, and that they should not interfere with the market. Also the government should not try to stop bubbles from forming in the market, instead they should regulate it and prevent it form getting bigger.

From the housing market to technology and science

While the housing market declines, the technology and science market is soaring. Vical, Geron and Novavax are feeling a great increase on their stocks. Vical (VICL) has made an effective vaccine for the H1N1, and it can be made within weeks. This announcement caused the stocks to rise. Geron Corp. (GERN) made a deal with GE to discover and develop products using embryonic stem cells. As for Novavax (NVAX), they received a license from the Spanish drug-maker to develop a flu vaccine for them, and they [Spanish drugmaker] will buy $3million in Novavax share.

All bets are in

Now investors can invest on stocks that predict the growth of the housing market or the decline of the housing market. MacroShares Major Metro Housing Up (UMM) and MacroShares Major Metro Housing Down (DMM). The UMM closed at $19.60, -.43, -2.15% and DMM closed at 30.97, +.03, .10%. The results of these stocks demonstrate the level of confidence investors have about recovery. This type of trading has never been done before. The funds invest in short-term Treasury securities and overnight repurchase agreements. The way MacroShares works is by issuing shares in pairs, and an equal number of shares for each fund are created.

Gold prices decline, the dollar rises

Also the almighty dollar brings down the price of gold. As the consumer confidence shifted it views on inflation, gold prices fell. Currently gold is worth $927.40 an ounce, and if it reaches the $1,000 mark then it shows the dollar strength weakening again. The 10% rally in may is the biggest gain in six months.