Gloomy consumer confidence halts market rally

The cat is out and the Federal Reserve did lower short-term interest rates by 50 basis points. It also provided a bleak view of the economy that pulled down the major stock indexes in the US. After yesterday’s record surge that saw the Dow, the NASDAQ, and the S&P 500 all rise, the news became a bit of a reality check which dampened the mood of the investment community leading to the sell-off.

The Fed is certainly very much concerned with the plunging consumer confidence that has hit its lowest level since the mid 1970s during the oil crisis. In other words, people are cutting back on spending especially on high ticket items like cars and appliances. Fears over job security because of the credit crisis make people take a second look on the items they purchase and that hurts the profit expectations of companies. Companies on the other hand, continue to slash jobs in order to keep afloat. Huge layoffs by companies, like the one by auto giant General Motors, is one of the more vivid demonstration of how the Wall Street crisis has affected Main Street.

Meanwhile, many of those jobs are fast migrating abroad like here in the Philippines. Just as China are taking over US manufacturing jobs, the Philippines have been getting many of the services jobs of American companies as we have seen the explosion of the call center industry here in the last decade. This has boosted consumer spending here especially in the urban centers where these call centers are operating. But it is interesting to see whether the slowdown in the US will have any effect to the flow of services jobs here. Many of the client pool of these call centers incidentally belong to the financial sector, which has been badly hit by the crisis like the now-bankrupt Washington Mutual.