CHESSNOID

I think there is definitely a disconnect with the stock market and economy.  I think the stock market is easily moved by good and bad news.  This morning 2 reports came out. One is based on real numbers and the other one was a poll sampling based on 5,000 people.

The first report:

NEW YORK (AP) – Home prices fell at the fastest annual rate on record in the first quarter, but the pace of month-to-month declines continues to slow, a closely watched housing index showed Tuesday.

The Standard & Poor’s/Case-Shiller National Home Price index reported home prices tumbled by 19.1 percent in the first quarter, the most in its 21-year history.

Home prices have fallen 32.2 percent since peaking in the second quarter of 2006 and are at levels not seen since the end of 2002.

The 20-city index fell by 18.7 percent in March from the year before and the 10-city index lost 18.6 percent. Those declines were a bit better than February’s and marked the second straight month the indexes didn’t post record drops.

Still, there are no signs home prices have hit bottom.

“We see no evidence that a recovery in home prices has begun,” said, David M. Blitzer, chairman of the S&P index committee.

All 20 cities showed monthly and annual price declines, with nine setting annual records. Fifteen cities posted double-digit drops and three cities — Phoenix, Las Vegas and San Francisco — all recorded declines of more than 30 percent.

I like this report because the interpretations are based on solid numbers from month to month and year to year where you can see trends based on a consistent methodology. You can even break the report down by city and by year.

On the other hand you have the consumer confidence report which is based on a 5,000 poll sampling. The stock market zoomed up on this report, but it just a small survey and not accurate. Just like in the different presidential races in the past, these surveys have a lot of variance that causes the statistical interpretation to vary.  AP News:

“Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. “While confidence is still weak by historic standards, as far as consumers are concerned, the worst is now behind us.”
…
Meanwhile, Americans continue to focus on buying necessities as they worry about their jobs. The unemployment rate is expected to climb to 9.2 percent in May from 8.9 percent in April and employers are expected to shed a net total of 523,000 jobs, according to economists surveyed by Thomson Reuters. The Labor Department is expected to release unemployment figures on June 5.

The Consumer Confidence survey — whose responses were received through May 19 from a representative sample of 5,000 U.S. households — showed a marked improvement in consumers’ outlook for jobs. The percentage of consumers expecting more jobs in the months ahead increased to 20.0 percent from 14.2 percent, while those anticipating fewer jobs declined to 25.2 percent from 32.5 percent. The proportion of consumers anticipating an increase in their incomes edged up to 10.2 percent from 8.3 percent.

I think the recession will bottom out when the housing market bottoms out. The historical numbers are there for the housing market. I think these Standard & Poor’s/Case-Shiller National Home Price index reports were good tools to predict the housing downtrends and uptrends in the past and will continue to be useful for the future.