Wall St mixed as confidence dips

Consumer and business confidence in Europe and the US has been hammered this past month, unsurprisingly, and yet stocks are mixed on Wall Street, a sign that some market watchers say the outlook may not be as dire as it appears.

Among them is Wilbur Ross, chairman of private-equity firm WL Ross & Co. He told Bloomberg News he expects the US to avoid a recession.

"We don't think it's going back into a recession, we think it's more of a subpression, where you have a slight economic growth, but a relatively jobless phenomenon," the 73-year-old billionaire said.

"It's a new kind of an event for us to be in. It's not technically a recession, because you're not having declining gross domestic product, but it sure feels like one to the people who are losing their jobs."

Pacific Investment Management Co.'s Bill Gross, however, disagrees. The current malaise may lead to a "developed economy" recession in the US and Europe, which might be hard to allay, Gross wrote in a commentary published on Pimco's website.

Data today showed that consumers on both sides of the Atlantic have little faith in the future - at least for the moment.

Confidence among US consumers plunged to the lowest level in more than two years this month while sentiment among euro-zone consumers dropped to the weakest since May 2010.

"There's more concern at the consumer level," David Sowerby, a Bloomfield Hills, Michigan-based portfolio manager at Loomis Sayles & Co., told Bloomberg. "That just affirms an economy which is not in, but closer to, recession levels. Individual investors are getting their conviction yet again tested on the stock market and the economy."

Even so, losses on Wall Street were limited today. In late afternoon trading, the Dow Jones industrial average slipped 0.09 per cent and the Standard & Poor's 500 Index fell 0.19 per cent. The Nasdaq Composite Index edged 0.08 per cent higher.

"The rally that we've seen (in recent days) is only gaining further ground," Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles, told Reuters.

"The consumer confidence number this morning was terrible and yet it only had a short-term downside effect on the market. That is a sign of a market in an uptrend mode. When you're able to get bad news and shrug it off, it's a very positive sign form the market."

And in Europe, the Stoxx Europe 600 Index closed the day with a 1 per cent gain.

Investors are already positioned for a poor economic climate, market watchers say, and so selective buying is in order.

Underpinning that outlook, Standard and Poor's has tweaked its economic growth forecasts for the euro zone, though the ratings agency said the shared currency bloc was not headed toward a new recession.

S&P predicted growth of 1.7 per cent in 2011 and 1.5 per cent in 2012, down from forecasts in July of 1.9 per cent and 1.8 per cent respectively.

"We continue to believe that a genuine double dip will be avoided given the still existing avenues for growth, although we recognise that downside risks are significant," S&P said in a report.