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In early trading Friday, the Dow dipped an additional 50 points, dashing the hopes of investors who thought the Dow was on the verge of making a run at setting a new all-time record high. In fact, all the major U.S. equity indexes sank this morning, with the Nasdaq composite index down more than 20 points and the S&P 500 off around 8 points.
Today, crude oil prices stabilized, but the markets retreated based on consumers' reaction to high prices at the pumps.
The University of Michigan reported this morning that its closely watched index of consumer sentiment plummeted from a reading of 87.4 in April to 79.0 this month. Economists were expecting the mood of households to remain steady or fall only slightly. In fact, the consensus forecast was for the index to dip only to around 86.5.
The reason for consumers' sour mood is mostly likely pegged to sky-high gasoline prices, which are close to breaking the $3-a-gallon barrier nationally. In California and New York, the average cost of a gallon of regular unleaded is already more than $3.
As part of its household confidence index, the University of Michigan survey asks consumers how they feel about current economic conditions. This would reflect their thoughts on big economic issues such as the job market and gas prices.
Well, the index's measure of current economic conditions fell in May at the fastest monthly rate since the school began measuring household confidence 28 years ago. That should tell us all something about how worried households are at being able to cover rising fuel costs.
