Consumer spending rose its highest level in 6 years in May, which has received mixed reviews from equity traders.
Today’s Spotlight Market
Consumer spending rose its highest level in 6 years in May, which has received mixed reviews from equity traders.? This can certainly be seen as positive news and helps alleviate some fears over corporate earnings and overall economic health. However, this could come at the price of speedier rate hikes from the Federal Reserve.? The central bank has been progressively more cryptic in its rate discussion over the past several meetings.? This has caused some uneasiness among traders, especially with economic data being so inconsistent.
Fundamentals
Purchases in the month of May increased 0.9%, which is the highest month to month increase since August 2009.? Traders were looking for a more modest increase of 0.7%.? Incomes rose 0.5 percent for the second consecutive month.? Consumers have seen better employment, a modest increase in income and stable fuel and food costs, which has led to speculation that consumers have been able to increase their savings. E-mini S&P futures have continued to establish new all-time highs on a fairly consistent basis, but traders have been very uneasy about earnings growth.? Companies are hiring more and many have questioned whether revenue growth could outpace new employment costs.? If this rise in consumer spending is the beginning of the trend, traders may rest a bit easier on the corporate earnings front.? A rise in consumer spending could lead to Fed inflation targets being met, which could open the door for interest rate hikes from the central bank.?
Technical Notes
Turning to the continuous chart, we see the e-mini S&P ?continuing to trend higher.? The rate in which prices are rising, however, has flattened out.? This could be a sign that the market is forming a rounded top and prices may begin to gradually fall. Conversely, this could simply be consolidation before a further increase in prices.? Several of the moving averages are close to bearish crossovers, which is something traders may want to keep a close eye on.
optionsXpress, Inc. makes no recommendations on investments and does not provide financial, tax or legal advice. Content and tools are provided for educational and informational purposes only. Online trading has inherent risks due to system response and access times may vary due to market conditions, system performance and other factors. An investor should understand these and additional risks before trading. Options and Futures involve substantial risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options and Risk Disclosure Statement for Futures and Optionsprior to trading. Both disclosures are available by calling 1-888-280-8020 or 1-312-629-5455.