Title: S&P 500 Extends Losses as April Consumer Confidence Misses Expectations

Teaser: April consumer confidence falls, raising questions about the consumption outlook at a time when investors are increasingly concerned about the possibility of a hard landing of the economy.

CONSUMER CONFIDENCE KEY POINTS:

  • April consumer confidence falls to 107.3 from 107.6 in March, disappointing consensus expectations
  • The decline in sentiment is prompted by a pullback in present situation index
  • S&P 500 extends losses following survey results as deteriorating sentiment may weigh on future household spending and, therefore, corporate earnings

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Consumer confidence unexpectedly declined at the start of the new quarter, as soaring inflationary pressures continued to squeeze household budgets. According to the Conference Board, its Consumer Confidence Index reversed some of its March gain and dropped to 107.03 from 107.6, disappointing expectations for a reading of 108.00, a sign that pessimism in the broader economy is not going away.

Drilling down into the survey results, the present situation gauge, based on Americans’ assessment of current business and hiring conditions, fell to 152.6 from 153.8 in the previous period. The mild deterioration in this indicator suggests that the strength of the labor market is not doing enough to bolster wage and personal financial expectations, a discouraging development for future consumption, the nation’s primary driver of economic growth.

Elsewhere, the Expectations Index rebounded and ticked up to 77.2 from 76.7 a month ago, but the recovery was modest amid uncertainty about the business environment and personal finances, with the cost of living at its highest level in more than 40 years and the war in Ukraine dragging for more than two months.

With sentiment on weaker footing, household spending may sputter in the near term, limiting economic growth in the second quarter, following an already soft expansion during the first three months of the year. However, it is important to stress one point: traders should not exclusively used survey-derived consumer confidence results as a proxy or to measure household expenditure, as soft data has become increasingly unreliable in recent years, particularly after the COVID-19 pandemic.

US CONSUMER CONFIDENCE

Source: The Conference Board

MARKET REACTION

Consumer confidence data released this morning reinforced Wall Street’s negative tone, with the S&P 500 extending its decline and falling more than 1.3% after the survey results crossed the wires. Looking ahead, it is important to keep watching the ongoing earnings season, as quarterly numbersand guidance may offer insight into the future amid intensifying fears that the U.S. economy is headed for a hard landing in response to the Fed’s aggressive tightening cycle.That said, traders should monitor corporate results from mega-caps Microsoft and Alphabet this afternoon after the closing bell. MSFT and GOOGL financial performance and forward-looking commentary will be key for the tech sector and could set the tone for the broader market.

S&P 500 5-MINUTE CHART

S&P 500 Chart Prepared Using TradingView

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—Written by Diego Colman, Contributor