December 20 - Stocks firmed to produce modest gains in the major indices as we approached midday, although the overall tone is thus far one of consolidation as we approach the holiday break. The VIX continues to trade just above 12 at this hour, while the dollar index is trading quietly near 102.3. Yields on 10-year Treasuries are trading near 3.90% after bouncing off nearly five-month lows earlier this morning, while yields on 2-year Treasuries are trading near 4.40%. Crude oil prices are roughly 1% higher after trading to their highest level since December 1st, while the grain and oilseed sector has a negative bias at midday, with wheat prices leading the way lower on evidence that Russia continues to pressure world prices.
The December Consumer Confidence Index surged to 110.7 (1985=100), up from 101.0 in November, and well above analyst expectations of 103.4. This fits with the expectations I wrote about in my morning commentary. The Present Situation Index rose to 148.5 this month, up from 136.5 in November. The Expectations Index jumped to 85.6, up from 77.4 the previous month, and the highest since July. The Conference Board noted that this month's increase in consumer confidence reflected "more positive ratings of current business conditions and job availability, as well as less pessimistic views of business, labor market and personal income prospects over the next six months." This new sense of optimism was prevalent across all ages and household income levels, although the largest gains came among those 35 - 54 years of age, and among those with income levels above $125,000. The survey allows for write-in responses to determine the greater concerns of those surveyed. This month's survey revealed that consumers remain concerned about rising prices in general, but the number of responses citing politics, interest rates and global conflicts ticked lower this month. Consumer expectations for a recession in the next 12 months declined, although two-thirds of the respondents still say that we could see a downturn in 2024.
Strong consumer confidence spurs economic activity, making it more difficult for the Federal Reserve to hit its 2% inflation mandate. The stickiest portions of inflation currently are shelter and wages. We saw a bullish housing market index released yesterday, showing that falling interest rates spurred a resurgence in housing activity in November. Today we see that existing home sales rose to an annualized rate of 3.82 million units in November, up 0.8% from 3.79 million in November, up from analyst expectations of 3.775 million and above the highest analyst guess ahead of the report. Existing home sales are still down 7.3% year-on-year, but they're closing the gap. The next thing we'll need to watch will be overall holiday consumer sales, and the impact that restocking shelves has on manufacturing as we head into the new calendar year.
U.S. commercial crude oil stocks rose by 2.9 million to 443.7 million barrels in the week ending December 15, leaving them 1% below the five-year average for mid-December. Gasoline stocks rose by 2.7 million barrels, putting them 2% below seasonal levels. Distillate stocks increased by 1.5 million barrels, leaving them 10% below levels typically seen in mid-December. Ethanol stocks rose to 22.9 million barrels, up from 22.1 million the previous week, but down from 24.1 million the previous year. Ethanol production slipped to 1,071K barrels per day last week, down from 1,074K the previous week, but up from 1,029K bpd the previous year. The production of ethanol utilized an estimated 107.8 million bushels, down from 108.1 million the previous week, but up from 100.6 million bushels the previous year. Marketing year to date corn use for ethanol totals 1.571 billion bushels, up 52 million from the previous year's pace.
