The Dow and S&P 500 added modest gains for the second consecutive day following a positive consumer confidence report and a decline in Italian borrowing costs. However, the Nasdaq missed out on a seat in the green and logged its eighth consecutive fall out of the last nine trading sessions.
The Dow Jones Industrial Average (DJIA) edged up 0.3% to settle at 11,555.63. The Standard & Poor 500 (S&P 500) gained 0.2% and closed yesterday’s trading at 1,195.19. The Nasdaq Composite Index failed to join the gainers and declined 0.5% to finish the day at 2,515.51. The fear-gauge CBOE Volatility Index (VIX) dropped further yesterday and is just over the key level of 30. The Street seemed less busy as consolidated volumes remained low once again with 6.73 billion shares changing hands on the New York Stock Exchanges, Amex and Nasdaq, versus the daily average of 7.96 billion shares. On the NYSE, decliners outnumbered the advancers by a ratio of 15 to 14.
It was not one of those familiar days when lingering European debt concern dampened investor sentiment. But domestic economic reports helped the markets register their second consecutive day of gains. Consumer confidence data not only topped the estimates but the index recorded its highest level since July this year. According to the Conference Board, the Consumer Confidence Index increased to 56.0 in November from 40.9 in October. The index also enjoyed an upward movement contrary to the downtrend in October and significantly topped the consensus estimates of a reading of 44.5. Additionally, the Present Situation Index increased to 38.3 from 27.1, and the Expectations Index jumped to 67.8 from 50.0.
The Director of The Conference Board Consumer Research Center, Lynn Franco, said: "Confidence has bounced back to levels last seen during the summer (July 2011, 59.2). Consumers' assessment of current conditions finally improved, after six months of steady declines. Consumers' apprehension regarding the short-term outlook for business conditions, jobs and income prospects eased considerably. Consumers appear to be entering the holiday season in better spirits, though overall readings remain historically weak".
The strong consumer confidence report comes a day after the markets posted strong gains spurred by record setting Black Friday weekend shopping. Retail data and consulting firm ShopperTrak confirmed a 6.6% hike in sales on Black Friday, reflecting a significant increase in the number of shoppers going to the stores or hitting the ‘buy’ button on retailer websites. According to The National Retail Federation, a record breaking 226 million shoppers hit stores and websites over the Black Friday weekend, significantly higher than 212 million last year.
While the retailers had a posted strong upward movement in their share prices on Monday, it was interesting to note their reactions following the consumer confidence reading. SPDR S&P Retail (XRT) shed 0.1% yesterday, but several retailers closed with significant gains. Among the gainers were J. C. Penney Company, Inc. (NYSE:JCP), Wal-Mart Stores Inc. (NYSE:WMT), Macy's, Inc. (NYSE:M) and Target Corp. (NYSE:TGT) and they were up 0.6%, 1.6%, 0.6% and 1.2%, respectively. However, they were countered by strong declines in stocks like Saks Incorporated (NYSE:SKS), Bon-Ton Stores Inc. (NASDAQ:BONT), Dillard's Inc. (NYSE:DDS) and Nordstrom Inc. (NYSE:JWN) which declined by 3.0%, 5.7%, 6.8% and 1.2%, respectively.
Meanwhile, investors chose to remain optimistic about European debt concerns as they expect the meet of the European officials to have a favorable outcome. Yesterday, in a bond auction, Italy paid over 7% on 10-year bond yields, a highly unsustainable level, but borrowing costs dropped somewhat from earlier highs. Surging borrowing costs is a significant headwind for the nation and Spain, Germany and France are also reeling under similar pressure.