NEW YORK — After a five-day run-up, the stock market on Friday found itself short of breath, as even retail stocks failed to react to a greater- than-expected rise in consumer confidence.
The index, compiled by Reuters/University of Michigan, found sentiment improving sharply this month, giving equities a brief lift.
“Even so, retailers have been down all day, and if they are not responding, why should the rest of the market?” reasoned Peter Boockvar, equity strategist at Miller Tabak.
“Confidence only matters if it translates into an increase in spending,” Boockvar added.
After wobbling up and down during the morning, stock indexes turned decisively lower in afternoon trading, with financials weighing the most heavily.
The Dow Jones Industrial Average fell 22.07 points, or 0.2 percent, to rest at 9,605.41, giving the blue chips a weekly advance of 1.7 percent. The S&P 500 Index fell 1.41 points, or 0.1 percent, to stand at 1,042.73, a level that translates into a 2.6 percent gain from last Friday’s close. The Nasdaq Composite declined 3.12 points, or 0.2 percent, to 2,080.90, with the technology-heavy index tallying a 3 percent rise for the week.
The consumer-confidence index jumped in early September to 70.2 from 65.7 in August, with the rise significantly better than expected by many analysts.
The stock market’s ho-hum reaction to the reading illustrates that in this latest case, consumers expressed confidence partly because of recent gains in equities, said Burt White, chief market strategist at LPL Financial.
“Now that the stock market has created gains in some people’s accounts, and the consumer begins to feel more comfortable, it bodes well for the rest of the year,” he said.
“It’s a real testament that while the improvement in the economy is already priced into Wall Street, now Main Street is starting to accept the recovery,” White said.
When the economic activity starts to pick up, companies typically resort to paying overtime and hiring temporary workers ahead of making full-time hiring decisions.
While both overtime and temp work have picked up, the country has not yet witnessed “a full-scale labor market recovery, but the seeds are there,” White said.
With inventories on the decline and “shelves darn near bare, if we get a bit of a pickup in consumer demand for goods and services, many retail companies are going to have to ramp up and restock shelves — that means factories will be back blowing smoke out of smokestacks again,” he said.
The question currently unanswered for the market is what entity will step in once government intervention ends.
“Once this baton is passed between all the stimulus that has driven third-quarter growth, the real question holding the market back is whether consumer or business spending steps in,” White said.
