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Heading into the last half an hour before the closing bell on Wall Street, the stock market wasn’t looking quite so negative as earlier in the day: the Dow Jones had managed to claw its way into positive territory, although the S&P 500 was still below break-even for the day and the NASDAQ 100 remained firmly lodged in the red.
Given just how steep the falls were at the end of last week, there’s some consolation to be had from inertia taking hold and the market effectively moving sideways while investors catch their breath – despite the rapidity of recent losses, there doesn’t appear to be any panic in the market.
Earnings have been solid rather than spectacular so far, and US macro-economic data has largely described a pattern of improvement. With the political issues that hassled the market periodically last year having taken a back seat this year, the overall backdrop for US stocks still looks benign. Weighing against this, we have the Fed on a path of reduced stimulus – of which we will get more of a story mid-week with the latest FOMC announcement – and we had a reminder last week of the effect global financial worries can have on the US stock market.
The bottom line is, though, that the US economy remains driven by consumer spending. A key report is out tomorrow, therefore, in the shape of the Conference Board’s consumer confidence index. Along with the University of Michigan’s Index of consumer sentiment, this is the most widely-followed indicator of which way the wind is blowing with regard to consumer spirits, which in turn, is a good pointer for trends in consumer spending. January consumer confidence is expected to rise to a reading of 79.0, after the level of 78.1 seen last month.