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Economic Update 06/02/2014

HOW OPTIMISTIC ARE CONSUMERS?

No firm conclusion can be drawn from May’s major consumer economic polls. The Conference Board’s consumer confidence index rose 1.3 points to 83.0. That was its second-best reading in the past six years. The University of Michigan’s final May consumer sentiment index dipped to 81.9 from April’s reading of 84.1. Fresh Commerce Department data also sent mixed signals. Consumer spending contracted 0.1% in April even as consumer incomes rose 0.3%.

PENDING HOME SALES IMPROVE AGAIN

They rose 0.4% for April, the National Association of Realtors said; this follows a 3.4% March increase. March’s S&P/Case-Shiller home price index showed an overall 12.4% annualized gain in house prices – quite good, but down appreciably from the 12.9% yearly advance recorded in the February edition.

Q1 GDP REVISED DOWN; BETTER NEWS FOR DURABLES

Reviewing declines in exports, business investment and business stockpiles, the Commerce Department said Thursday that the economy actually shrank 1.0% in the first quarter even with a 3.1% advance in personal spending. April’s durable goods orders surprised to the upside, however – they were up 0.8%. Economists polled by MarketWatch had forecast they would retreat 0.8%.

WHO SOLD IN MAY?

There was no exodus from stocks last month. May saw a 2.10% gain for the S&P 500. In an abbreviated trading week, the S&P rose 1.20% to settle at 1,923.57 Friday; the Dow (+0.67% to 16,717.17) and the Nasdaq (+1.36% to 4,242.62) also advanced.

THIS WEEK: On Monday, ISM’s May manufacturing PMI arrives plus earnings announcements from Quiksilver and Krispy Kreme. Tuesday brings the Commerce Department’s report on May auto sales and the Census Bureau’s report on April factory orders. Wall Street interprets the May ISM service sector index and the May ADP job change report Wednesday, plus a new Federal Reserve Beige Book and Q2 results from Hovnanian. May’s Challenger job cuts report appears Thursday along with earnings from J.M. Smucker and VeriFone and the latest initial claims numbers. The first Friday of June brings the Labor Department’s May employment report.

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