September 24 - Stocks dipped on disappointing consumer data this morning, but then firmed again into midday, with a large stimulus package in China combining with the Federal Reserve's rate cut path to provide support. The VIX is trading near 16 at midday, with the dollar index trading near 100.6. Yields on 10-year Treasuries are trading near 3.75%, while yields on 2-year Treasuries are trading near 3.56%. Crude oil prices are 1% higher on the Chinese stimulus combined with a developing Hurricane for some Eastern Gulf production areas, while the grain and oilseed complex is mixed. The complex started the day in the green, but values slowly eroded through the morning, with soybeans and soyoil remaining the lone holdouts in positive territory at midday.
The Conference Board's consumer confidence index took a surprise turn lower this month to 98.7, down from an upwardly revised 105.6 in August, and below analyst expectations of 103.0. The downturn was a surprise after the initial consumer sentiment readings issued by the University of Michigan came in at their highest level since May. But the Conference Board showed a sharp decline in its Present Situation Index - falling by 10.3 points to 124.3. The Expectations Index dropped 4.6 points to 81.7, although that keeps it above the historical recessionary warning level of 80.0. The above numbers are the product of a survey conducted with a cutoff date of September 17. The September decline in consumer confidence is the largest in three years, with all five components of the survey in decline. Declines were most significant for consumers aged 35 to 54, while consumers under 35 were the most confident. Confidence declined across all income groups, although losses were greatest for the lowest income groups. Of particular interest, the average 12-month inflation expectations increased to 5.2% this month, perhaps leading to a modest increase in plans to buy homes and new cars before those rates rise again.
Other data released this morning included the Federal Housing Finance Agency home price index, which increased 0.1% month-on-month in July (lagging indicator), which beat expectations of -0.1%, and it was better than the 0.00% expected by analysts. The home price index rose 4.5% year-on-year in July, down from 5.3% in June. The Richmond Fed manufacturing index dropped to -21 in September, down from -19 in August as the manufacturing sector continues to struggle. The Richmond survey found that new orders increased this month, but shipments and employment both declined during the month. The average growth rate of prices paid by firms increased this month, while prices received decreased somewhat.
Tropical Storm Helene has sustained winds of 46 miles per hour this morning. The storm is expected to increase to anything between a category 2 and a category 4 hurricane before making landfall along the Florida Panhandle late Thursday, bringing heavy rains to the Southeast. Depending on the timing of another low pressure dipping down across the Midwest from the northwest, we could see Helene's moisture get wrapped back to the west across much of the central Mississippi River Valley. Last night's model runs took the storm a bit further to the east, but they still tend to pull the moisture to the west. That would delay harvest, but also provide much-needed moisture to soil profiles in theEastern Midwest before winter sets in. A boost in water levels on the Mississippi River is also needed to facilitate movement of corn and soybeans down the river to New Orleans before winter. Unfortunately, the River doesn't look to benefit much. We could see good rains across much of the Eastern Midwest / Ohio River Valley if the two low pressure systems have the proper timing to combine into one, while flooding will be an issue from Florida north through the Carolinas.
