Stock prices retreated yesterday after some slightly disappointing reports on consumer attitudes.
By Peter Martin
Wednesday, December 3, 2014
But upbeat auto sales figures for November have helped rekindle risk appetite on Wall Street today and there was also a boost from news of better-than-expected construction spending.
By early afternoon in New York, the Dow Jones had gained 0.43% or 76 points to 17,853 and the S&P 500 Index climbed 0.49% or 10.0 points to 2063.4.
Domestic vehicle sales were slightly ahead of estimates in November, despite a 1.8% decline in monthly sales for Ford. General Motors, the largest auto maker in the country, enjoyed a 6% rise in sales in November, its best November performance since 2007, while Chrysler’s sales hit a 13-year high, climbing 20% year-on-year.
Kurt McNeil, US vice president of sales operations for GM, said the strong performance went beyond heavy showroom traffic fuelled by Black Friday. ‘More people have jobs and job security, their wages are starting to increase, household wealth is growing,’ he said, adding that low gas prices have also played a part. Shares in General Motors ($GM) rose 1.5%.
Construction spending rebounds
The other major economic news domestically was October’s report from the Commerce Department on construction spending. The report showed a considerable rebound in public outlays (+2.3%), after a 1.6% decline in the month prior. Private residential spending was another component of notable strength, increasing 1.3% on the month. Overall, construction spending was 1.1% higher in October, following on from September’s 0.1% fall (revised higher in today’s figures from the 0.4% downturn that was originally reported). The consensus estimate had been for a 0.5% gain in October, so the unexpected bullishness of today’s report may well boost analyst estimates for GDP growth in the final quarter of the year.
Euro weakness as ECB meeting looms
In the forex market, the euro weakened substantially against the dollar ahead of this week’s meeting of the European Central Bank’s (ECB) Governing Council. Expectations for another tranche of stimulus measures by the central bank were strengthened by news of a sharper than expected decline in prices at the wholesale level in the eurozone during October.
The Producer Price Index (PPI) fell 0.4% in October, the largest drop in a year. The annual change was -1.3%, the fifteenth straight month in which this measure has been negative. Falling energy costs was a major driving force behind the headline level, but there were also broad declines elsewhere.
With oil prices continuing to fall (US light crude oil futures are down more than 2% today, the fifth decline in six sessions), the risks for eurozone inflation continue to be to the downside and the worry for the ECB will be that these falls at the producer level may translate across into consumer inflation. EUR/USD was down -0.7% at 1.2383 by mid-afternoon in New York. The ECB meets on Thursday to make a decision on monetary policy.
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