It’s another sizeable down day in New York, but it was a lot worse earlier in the trading session, when the Dow was down 231 points. The index has recovered significantly, better than halving its losses by early afternoon in New York, but it was still down by 0.66% or 104 points at 15,744. The S&P 500 was off by 0.39%.
This leaves the S&P 500 on course for its worst January in four years, as investors display lingering worries about the slump in emerging-market currencies.
It’s been a brisk day for US economic news, with most of the data on the tentatively encouraging side. Personal income was unchanged in December after a 0.2% increase in November, but consumer spending continued to grow over the period, increasing 0.4% last month after a o.6% increase the month prior (originally reported as 0.5%).
There were some rare signs of inflation warming up in the report, with the Personal Consumer Expenditure price index rising 0.2% in December, 0.1% excluding food and energy. Year-on-year the price index is 1.1% higher at the headline level, still well short of the Fed’s 2% target.
The Chicago PMI shows business activity in the Chicago area continuing to expand at a robust rate, with a reading of 59.6 for January and new orders also at elevated levels. The University of Michigan’s index of consumer sentiment improved in the second half of this month, rising to a final reading of 81.2 compared to the mid-month level of 80.4, although this is down a little from December’s final reading of 82.5 . We saw the Conference Board’s consumer confidence index jumping earlier this week, and today’s better-than-expected result from the consumer sentiment index will raise hopes that consumer spending will stay strong.
This week has seen a lot of volatility in the market, with today the mirror-image of yesterday when we saw risk-assets surging. Instead we have safe-haven instruments benefitting from today’s risk-off sentiment, most notably the Japanese yen, with USD/JPY dropping 0.32% and the euro weakening 0.73% against the yen.