In a sign that Americans are bracing themselves for hard times, or at least taking a break and holding their breath while they see what direction things go in, apparel chains reported September sales, which usually rise at this time of year, were not at all where stores expect them to be.
In a sign that customers are looking toward frugality, WalMart Stores, Inc. (NYSE: WMT) saw a small gain in sales, though not as much as analysts would have liked.
Look for this effect to hit other retail environments, not just apparel, if the market continues to be the top headline and spook customers.
One of the most basic precepts of the U.S. economy is that Gross Domestic Product (GDP) growth depends on the consumer -- some 70% of GDP growth, in particular. The U.S. has created two inter-related industry clusters to assure that consumer spending keeps growing. While one continues in full force, the other is failing fast. This is causing consumers to put their spending into reverse, creating an economy-wide recession diet on steroids.
What are these two inter-related industry clusters? The Celebrity Industrial Complex (CIC) assures that we see images of the wealthiest and most celebrated sliver of society -- creating a desire to close the gap between us and them. And the Borrowing Industrial Complex (BIC) provides the cash we otherwise could not afford to pay for the goods and services that never quite close that gap. The CIC is still going strong, but with incomes down since 2000, household wealth slashed by $6 trillion, and banks scrambling for capital, the BIC is in cardiac arrest.
Consumers have decided to ignore the psychological pull of the CIC and use whatever money they still have to keep their families alive. While official government statistics don't show this -- perhaps they will when it releases third quarter reports -- consumers are cutting back. Gil Colon, sales manager at Villa Reale, a Las Vegas art and furniture store puts it well: "People have lost their confidence. They have no buying power. They are losing their retirements, their vacation funds, and they are scared to commit to buying anything," according to The New York Times.
Consumer confidence hit a five month high, according to a Reuters/University of Michigan survey. However, for those hoping for a recovery, that good news comes with a lot of negative.
General consumer spending dipped, probably in no small part to a dip in personal income of 0.7% in July, according to recent numbers. Also up, price increases that have pushed inflation to a 17-year high that has eroded consumer buying power. Both of these work to negate any impact consumer confidence might have.
Also adding weight to the market are worries and uncertainties surrounding the effect hurricane Gustav will have on oil production, ending a long run of lowering oil prices. Expect higher gas prices.
With all these worries on people's minds, here are today's unofficial closing bell levels:
For those of you who own blue-chip stocks, this is an eye-opening prediction. An article at CNBC.com talks about the possibility of Dow 10,000. Dow 10,000!
I repeated that in case you didn't get it the first time. It sounds pretty scary to me, and it should sound pretty scary to a lot of you out there. I'd have to presume that most investors don't use the stock market primarily as a substitute casino for the times when Las Vegas is out of reach. Many of you out there must own a Disney (NYSE: DIS) or a Coca-Cola (NYSE: KO), maybe a General Electric (NYSE: GE) or a Microsoft (NASDAQ: MSFT), something generally considered core and safe for the long-term. I happen to own the first three. Anyone who does is in for some huge volatility if Dow 10,000 comes along.
Actually, whether it comes along or not, volatility is here to stay. And here's the thing about the Dow 10,000 prediction: it isn't so farfetched on a mathematical basis. When you first read that number, you say to yourself "No way, that would be like a depression!" But because the numbers are getting higher, the actual point moves aren't as dramatic as they may seem on the surface. If we hit 10,000, that would represent a decline of approximately 29% from the high reached back in October 2007. As I write this, the Dow is about 20% off the high. Is another 9% feasible?
Well, I can't predict when the market will turn, or when Toyota's (NYSE: TM) stock will once again be in favor, but I can tell you that I won't be buying its shares here. According to this article, Toyota may not do as well as it planned in terms of sales in 2008 in the U.S. market. The company told investors that year-over-year growth in the number of cars sold is now in question. In 2007, Toyota moved 2.62 million automobiles in the U.S., and for 2008, Toyota wanted to sell 2.64 million cars.
I probably don't need to say it, but I will: considering the negative trends in oil futures, gas prices, consumer confidence, inflation, recession potential, and the housing industry, the fact that the stocks of Toyota, General Motors (NYSE: GM), and Ford (NYSE: F) are having a really tough time right now is not surprising. Toyota's stock closed down 2% on the news of the sales struggle at the end of Tuesday's trading session. That's not a particularly horrible downward move, and the stock is still a few bucks above its 52-week low, but I think there's a chance the stock will take out that low at some point.
Investing in the auto industry might be a dicey move here. Sure, you could pick up some bounces, but being early in this space could prove depressing for even the heartiest investor. Auto sales might get worse before they get better (they're pretty bad now as it is), so I'll stay away from Toyota and this sector.
Disclosure: I don't own any company mentioned here; positions can change at any time.
U.S. consumer confidence declined to 50.4 in June -- the fifth lowest reading in the index's history -- as consumers continued to express concern over a stagnant economy and virtually non-existent job growth, The Conference Board announced Tuesday.
Economists surveyed by Bloomberg News had expected the index to drop to 56.5 in June. Consumer confidence index stood at 58.1 in May, 62.8 in April, 65.9 in March, and 76.4 in February.
The board said consumers' evaluation of present-day conditions weakened further in June. Those claiming business conditions are "bad" increased to 32.4% from 29.7%, while those claiming business conditions are "good" declined to 11.5% from 13.0%.
Consumers' assessment of the job market was considerably more pessimistic than last month. Those saying jobs are "hard to get" rose to 30.5% from 28.3, while those claiming jobs are "plentiful" decreased to 14.1% from 16.1%.
U.S. consumer confidence in early June plunged to its lowest level in 28 years, an indication American adults are becoming increasingly concerned about rising energy and food prices, job layoffs, and the prospects for a U.S. economic recovery.
Reuters reports that consumer confidence has hit a 28-year low. That should not come as a surprise. After all, between 2000 and 2007 the median income has dropped from $61,000 to $60,500. But prices have skyrocketed. And with growth slowing -- the prospect of layoffs looms large while consumers expect prices to keep rising.
There is something called the Federal Reserve. And it's supposed to keep those inflationary expectations under control by raising interest rates to strengthen the currency and keep credit use from going haywire. But the Fed got confused. It thought that by cutting rates from 5.25% to 2%, it could revive a frozen credit market without boosting inflation. Whoops! Now the credit markets remain frozen but actual inflation and expectations for future inflation are both skyrocketing.
U.S. consumer confidence in May 2008 plunged to its lowest level in almost 28 years, an indication American adults remain very concerned about the near-term health of the U.S. economy as it moves closer to its first recession in six years.
It was the index's lowest reading since June 1980 - - a period also characterized by high oil/gasoline prices and a sluggish U.S. economy.
Economists surveyed by Bloomberg News had predicted that the May 2008 index would fall to 59.5. The index stood at 62.6 in April 2008 and 69.5 in March 2008.
Family finance, inflation concerns
In the May 2008 survey, half of all families reported that their finances have recently worsened. Also, inflation expectations rose in May 2008 to their highest levels in more than two decades.
U.S. consumer confidence declined to 57.2 in May 2008 -- its lowest level in 15 years -- as consumers continued to express concern over record gasoline prices and virtually non-existent job growth, the Conference Board announced Tuesday.
Economists surveyed by Bloomberg News had expected the index to drop to 60.0 in May 2008. Consumer confidence totaled 62.8 in April 2008 and 65.9 in March 2008. In February 2008, the index stood at 76.4.
Also, the board said consumers' evaluation of present-day conditions weakened further in May 2008. Those claiming business conditions are "bad" increased to 30.6% from 26.5%, while those claiming business conditions are "good" declined substantially, to 13.1% from 15.4%.
Meanwhile, consumers' assessment of the job market was considerably more pessimistic than last month. Those saying jobs are "hard to get" rose to 28.0% from 27.9, while those claiming jobs are "plentiful" decreased to 16.3% from 17.1%.
Further, the board said consumers' short-term expectations continued to deteriorate in May 2008. Consumers expecting business conditions to worsen over the next six months increased sharply to 33.6% from 27.4%, while those anticipating business conditions to improve increased slightly, to 10.4% from 10.1%.
Economic Analysis: The May 2008 consumer confidence headline says it all: U.S. consumer confidence is at a 16-year low. The slow growth / no growth U.S. economy understandably is weighing on the typical person's outlook. Stagnant wages for many, record-high energy prices, increasing food prices, uncertain corporate prospects and the worst housing market in a generation, suggest difficult economic circumstances for many Americans, and one would expect concern about the above to show up in polls / consumer surveys. The public (correctly) senses that economic conditions are not good for most individuals and businesses; it will take several months of positive economic data points to reverse this outlook.
Kohl's Corp. (NYSE: KSS) recently said that it would scale back its plans for opening new locations in the U.S. in 2008 and for the next few years, citing a "squeeze-play on consumers." Instead of the announced 90 new stores this year, Kohl's now expects to open 70 to 75 new stores this year. The retailer is still on track to open its 1,000th store later in 2008, however.
Although the "mall store outside the mall" has identified about 400 sites for potential locations in the near future, it said that kind of expansion may not happen until 2014. Last year, the retailer opened 112 stores nationwide, ending up with a total of 943 stores total in 57 states.
Kohl's is right when it said that its customers are "under a lot of pressure" due to higher fuel, grocery and health care costs. The good news, from what I have seen in the past, is that Kohl's has very low prices for much of its "Croft & Barrow" apparel items, its private-label brand. If it can fight the good fight with Target Corp. (NYSE: TGT) and Wal-Mart Stores, Inc. (NYSE: WMT) in terms of prices and clothing selection, it may yet have decent sales on those items as expensive housewares and related items sink this year.
Profit rose to $2.71 billion, or 82 cents per share, compared with $2.51 billion, or 74 cents per share, a year ago. Revenue rose 9% to $20.46 billion from $18.69 billion last year. The Cincinnati-based company was expected to earn 81 cents on revenue of $21.44 billion, according to Thomson Financial.
"P&G delivered strong results in-line with long-term targets in a challenging economic and competitive environment with broad-based sales and share growth, earnings growth and overhead cost improvement," said Chief Executive AG Lafley in the earnings release.
Shares of the maker of Tide (my favorite detergent) and Pampers (our family's preferred diaper for my son) have slumped more than 10% this year under-performing rivals including Church & Dwight Co. (NYSE: CHD) and Colgate-Palmolive Co. (NYSE: CL). Uniliver Plc. (NYSE: UL) has fared slightly worse than P&G.
U.S. consumer confidence declined in April 2008, as consumers continued to express concern over rising food and energy costs, which are boosting retail inflation and lowering disposable income.
U.S. consumer confidence fell in April 2008 to 62.3 from a revised 65.9 in March 2008, the Conference Board announced Tuesday. It was the index's lowest reading since 2003.
Economists surveyed by Bloomberg News had expected the index to drop to 62.0 in April 2008. In February 2008, the index stood at 76.4.
The board said consumers' evaluation of present-day conditions weakened further in April 2008. Those claiming business conditions are "bad" increased to 26.7% from 25.5%, while those claiming business conditions are "good" dipped slightly, to 15.3 from 15.6%.
Consumers' assessment of the job market was considerably more pessimistic than last month. Those saying jobs are "hard to get" rose to 27.9% from 24.65, while those claiming jobs are "plentiful" decreased to 16.6% from 19.2%.
Shares of home builder KB Home (NYSE: KBH) have been tumbling in early trading after the company announced this morning it swung to a first quarter loss. The company's quarterly numbers were dragged down by higher write-downs related to lower home prices. Unlike its competitor Lennar Corp. (NYSE: LEN), KB Home was not able to beat analysts' expectations, sending its shares down over 5% this morning.
Including a charge of $223.9 million in write-downs, the residential home builder posted a quarterly loss of $268.2 million, or $3.47 per share, hurt by lower new home deliveries and orders. The company's quarterly numbers were also hurt by higher impairment charges. Analysts expected KB Home to show a quarterly loss of "only" $1.17 per share.
The global crisis in the credit market put pressure on the home builder's revenue, which plunged 43% to $794.2 million. For this period, the slumping housing market and credit crisis came with a plunge of 75% for new home orders and with a drop of 57% for new home deliveries. Analysts, on average, predicted sales of $805.7 million in the quarter, according to Thomson Financial.
After showing optimism last month over its further earnings, department store operator J.C. Penney Inc. (NYSE: JCP) turned this morning to the pessimistic side and warned it expects first-quarter earnings below its previous predictions due to weak consumer demand.
The company now expects earnings of about 50 cents per share in the first-quarter, down from its prior forecast for profit in a range of 75 cents and 80 cents per share. This is well below analysts' expectations of earnings of 75 cents per share in the quarter, according to Thomson Financial.
J.C. Penney blamed challenging market conditions that put a curb on consumer spending. The slumping U.S. housing market, credit crisis and soaring oil prices put pressure on consumer confidence, resulting in low revenue numbers. During the Easter holiday, the retailer counted lower-than-expected sales.
One of the most basic precepts of the U.S. economy is that Gross Domestic Product (GDP) growth depends on the consumer -- some 70% of GDP growth, in particular. The U.S. has created two inter-related industry clusters to assure that consumer spending keeps growing. While one continues in full force, the other is failing fast. This is causing consumers to put their spending into reverse, creating an economy-wide 
For those of you who own blue-chip stocks, this is an eye-opening prediction. An article at 
Well, I can't predict when the market will turn, or when 
U.S. consumer confidence in May 2008 plunged to its lowest level in almost 28 years, an indication American adults remain very concerned about the near-term health of the U.S. economy as it moves closer to its first recession in six years. 
Consumers these days are so lacking in confidence that 
U.S. 
Shares of home builder 
After showing 
Yogi is right: Ninety percent of this (economics) game is half-mental
Is the market always right?
Comfort Zone Investing: How this all might play out
