Consumer confidence took a big step up this month, driving U.S. retail stocks higher until the president of the Federal Reserve Bank of Philadelphia rained on the parade.
This story first appeared in the September 26, 2012 issue of WWD. Subscribe Today.
Charles Plosser said the Federal Reserve’s efforts to boost the economic recovery by buying bonds was not likely to succeed. “The slow pace of the recovery should not be taken as evidence that the stance of monetary policy is inappropriate or that ever more aggressive accommodation can speed up that pace,” he said.
Prior to Plosser’s speech in Philadelphia, retail stocks were rallying on word that consumer confidence rose to its highest level in seven months. The S&P Retail Index rose as much as 1 percent before closing down 0.7 percent, or 4.80 points, to 653.38. The Dow Jones Industrial Average fell 0.8 percent, or 101.37 points, to 13,457.55.
Among the decliners were Oxford Industries Inc., down 4.7 percent to $56.07; Fossil Inc., 3.4 percent to $84.89; Guess Inc., 3.3 percent to $24.99, and Under Armour Inc., 3.2 percent to $54.62.
Shoppers, at least, are feeling better.
The Conference Board’s Consumer Confidence Index was up 9 points to 70.3 this month, the highest level since February and much better than the 1.7-point increase economists expected.
Lynn Franco, director of economic indicators at The Conference Board, said, “Consumers were more positive in their assessment of current conditions, in particular the job market, and considerably more optimistic about the short-term outlook for business conditions, employment and their financial situation. Despite continuing economic uncertainty, consumers are slightly more optimistic than they have been in several months.”
Of the people who took the research firm’s survey, 18.2 percent said they expected business conditions to improve over the next six months, up from 16.7 percent, and 18.5 percent said they expect more jobs in the months ahead, up from 15.8 percent.
“The summer doldrums have been reversed, and there is a considerably more upbeat view of job prospects,” said Chris Christopher, U.S. economist at IHS Global Insight. “Back-to-school retail sales have not been very promising, and this bounce in consumer mood — if maintained — may assist in boosting holiday retail sales.”
In Europe, stocks closed higher as Mario Draghi, president of the European Central Bank, called on governments to use “fundamental” measures help resolve the debt crisis.
“We expect the economy to return to growth next year.… Governments must act to ensure this immediate upturn strengthens rather than weakens,” said Draghi.
The FTSE 100 in London increased 0.4 percent to 5,859.71, as the CAC 40 in Paris rose 0.5 percent to 3,513.81, the DAX in Frankfurt climbed 0.2 percent to 7,425.11, and the FTSE MIB in Milan advanced 0.4 percent to 15,932.60.
Among the retail and luxury stocks that gained the most ground were Safilo, up 5.9 percent to 6.18 euros, and Inditex, 2.2 percent to 99.70 percent.
Posting declines for the day were Aeffe, which fell 6.1 percent to 0.63 euros; Burberry, 1.1 percent to 10.18 pounds, and Ferragamo, 1.4 percent to 16.58 euros.
The pound traded at $1.62 against the dollar, while the euro traded at $1.29.