Most major U.S. stock indices are in the red today following disappointing macro economic data. Indeed, heading into the afternoon, the Dow 30 is down less than 1% on a number of big-picture losses while the S&P 500 fluctuates between red and green today. Why are stocks down?
Well, at first glance, it seems like an underwhelming Confidence Board consumer confidence report is fueling today’s minor selloff. The U.S. Consumer Confidence Index slipped in February for the second consecutive month. The index is currently hovering around 102.9, down from 106 in January (following a retroactive revision lower). This marks the lowest level for the index in three months.
The Consumer Confidence Index is an economic indicator that signals changes to consumers’ perception of consumption and saving. The University of Michigan and Conference Board both operate consumer confidence indices, constructed via questioning random samplings of consumers about current economic conditions and expectations going forward.
Ataman Ozyildirim, Senior Director of Economics at the Conference Board, had the following to say:
“Consumer confidence declined again in February. The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more.”
As part of the Confidence Index, the Confidence Board also maintains the Present Situation Index and the Expectations Index — assessments of consumers’ current and short-term outlook on business, income and labor conditions.
This time around, consumers were split on current compared to future conditions. The Present Situation Index increased from 151.1 to 152.8. Meanwhile, the Expectations Index continued its fall, dropping from 76 in January to 69.7 in February. The Expectations outlook is particularly worrisome as February marks the 11th of the past 12 months where the Expectations Index has hovered below 80 — a notorious recession signal.
According to the indices, 14.2% of consumers “expect business conditions to improve” within the next six months, down from 18.4%. On the other hand, 21.9% of consumers expect conditions to deteriorate, down from 22.6% previously.
So, what else is pushing stocks down today?
Why Are Stocks Down Today?
This consumer confidence data isn’t the only bearish indicator today. Indeed, there are a few other factors weighing down equity markets — namely, a surprisingly underwhelming Chicago Business Barometer report, also known as the Chicago PMI.
The Chicago PMI is essentially a regional manufacturing index, something of a precursor to the national ISM Manufacturing Index due out Wednesday. The February PMI fell to 43.6, the “sixth consecutive month of contractionary business activity” and the barometer’s lowest level since November. Not only is this a deterioration from January’s 44.3 reading, it’s also well below the 45.0 reading that the Wall Street Journal forecast. According to the report, the drop is largely due to a fall in the production index, down 10.2 points in February.
On top of underperforming indices, investment banking giant Goldman Sachs (NYSE:GS) may have added to the general bearish sentiment today. In the company’s second-ever investor day this morning, Goldman execs attempted to explain the company’s wildly unsuccessful personal banking initiative, “Marcus.”
The online-only, high-yield saving account was an attempt to compete with the likes of JPMorgan Chase (NYSE:JPM) consumer banking endeavors. Unfortunately, Marcus proved a wildly unprofitable product for Goldman.
According to Goldman Sachs CEO David Solomon, Marcus was a learning experience.
“It was clear we lacked [a] certain competitive advantage and we did too much too quickly, which affected our execution […] There were some clear successes but there were also some clear stumbles […] We learned a lot […] I certainly think we could have done a better job in a substantive way bringing you all along.”
Unfortunately, the CEO’s comments are hardly inspiring confidence in investors. GS stock is down about 3% today, with Wall Street buzzing with concern for the 154-year-old bank.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
