The Dow Jones Industrial Average‘s 10-day winning streak and nine-day run of record-setting highs may come to an end today. The University of Michigan posted preliminary results from its Consumer Sentiment Index this morning, and economists were expecting a reading of 78. But the report indicated that sentiment fell to 71.8 in March from a previous reading of 77.6 in February. Not only does the falling number frighten investors, but because it was much worse than estimates, some fear the economy may quickly and unexpectedly head in the wrong direction.
As of 12:45 p.m. EDT, the Dow has lost 30 points, or 0.21%, with only eight of its 30 components currently trading in the green.
Today’s Dow downers
The poor consumer sentiment numbers are affecting a number of Dow components today. Blue-chip telecoms AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) are down 1.1% and 1%, respectively. These declines come a day after Samsung launched its new Galaxy S4, which might ordinarily spur upgrades and perhaps even attract new consumers to smartphones. Both trends would help AT&T Inc. (NYSE:T)’s and Verizon Communications Inc. (NYSE:VZ)’s profits, as smartphones come with higher margins.
But the University of Michigan report clearly shows that consumers are losing confidence in the economy, which may signal that they will curb their spending. That would hurt not only the telecommunications industry, but also every retailer and consumer service provider. The Dow’s big retailers, Wal-Mart Stores, Inc. (NYSE:WMT) and The Home Depot, Inc. (NYSE:HD) , have lost a respective 1% and 1.1, while entertainment giant The Walt Disney Company (NYSE:DIS) has lost 0.1% today.
Fellow Fool Morgan Housel recently pointed out that Wal-Mart performs better when the economy is struggling because it can offer quality products at low prices. When consumers have a poor view of the economy and turn to counting pennies, they flock to the lowest-price retailers.
Furthermore, fellow Fool John Maxfield argues that the same could be said of Home Depot. He feels that when the economy is bad, average homeowners are more inclined to perform their own household projects, rather than pay contractors.
While I agree more with the argument for Wal-Mart Stores, Inc. (NYSE:WMT), I can also see why cash-strapped customers might do home improvements themselves. Regardless, though, when consumers are not confident about the economy or the reliability of their future paychecks, they will likely increase savings and cut spending, which will hurt every retailer.
The article Why the Dow’s Winning Streak May End Today originally appeared on Fool.com and is written by Matt Thalman.
Fool contributor Matt Thalman has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Check back Monday thru Friday as Matt explains what caused the Dow’s winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513.
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