Stocks chopped around Tuesday as buyers took a breather following Monday’s big rally. Another disappointing reading on consumer sentiment kept pressure on the main benchmarks and a round of disappointing earnings reports did little to lift sentiment.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all opened with modest gains today. However, the three indexes slipped into negative territory after the mid-morning release of The Conference Board’s Consumer Confidence Index.
The headline index fell by 7.2 points month over month in March to 92.9, as consumers’ outlooks for both business and labor market conditions worsened.
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Notably, the Expectations Index, which measures short-term views, dropped to 65.2, the lowest level in 12 years and below the key 80 threshold, which has previously served as a signal for a looming recession.
“Consumers are spooked by headlines about higher tariffs and trade war, DOGE cuts, and the stock market selloff,” says Bill Adams, chief economist at Comerica Bank.
“When people fear for their jobs, they will cut back on discretionary spending on vacations and going out, and delay big purchases like new houses, cars, or appliances,” he adds.”
Adams says it’s hard to say how long the headwinds from weak consumer sentiment will last, but it’s likely we see slowing economic growth compared to recent years. (Fed Chair Powell, though, is more focused on “hard data” vs “soft data” readings at the moment.)
At the close, the Dow (+0.01% at 42,587), the S&P 500 (+0.2% at 5,776) and Nasdaq (+0.5% at 18,271) had found their way back into the green.
KB Home slumps after earnings, new home sales data
In single-stock news, KB Home (KBH) fell 5.2% after the homebuilder reported earnings. In addition to missing top- and bottom-line estimates for its fiscal first quarter, it lowered its full-year outlook, citing “muted” demand at the start of the spring selling season.
“Consumers are working through affordability concerns and uncertainties related to macroeconomic and geopolitical issues, which are causing them to move slowly in their homebuying decisions,” said KB Home CEO Jeffrey Mezger in a statement.
Not helping matters for the housing stock was a report from the Census Bureau that showed new home sales rose 1.8% from January to February, to a seasonally adjusted annual rate of 676,000 – fewer than economists were expecting.
“A sharp drop in mortgage rates did little to motivate closings of new homes last month, with transactions barely recovering [from the month prior],” says José Torres, senior economist at Interactive Brokers.
More bad news for Tesla
Tesla (TSLA) was down nearly 3% intraday after data showed the company’s electric vehicle sales in the European Union slumped 47% year over year to 11,743 cars.
This marked the second month in a row that Tesla sales were down in the region, falling 45% in January.
However, the consumer discretionary stock finished 3.5% higher, extending a recent rebound sparked by a controversial recommendation from Commerce Secretary Howard Lutnick. Still, TSLA remains 29% lower for the year to date.
Cloudflare gets a double-upgrade
Cloudflare (NET) jumped 2.8% after BofA Securities analyst Madeline Brooks double-upgraded it to Buy from Underperform (Sell). She also hiked her price target on NET to $160 from $60, representing implied upside of more than 25% to current levels.
“We think Cloudflare is poised to be one of the true ‘AI winners’ in software,” Brooks says. “It stands out by offering customers an alternative to building their own capacity – an expensive and inefficient task.”
She places “a high probability” on Cloudflare becoming the leader in AI-as-a-Service (SaaS), which she believes “will be the AI consumption method of choice for Enterprises.”
Brooks adds that customers “are increasingly choosing Cloudflare over hyperscalers” such as Amazon Web Services and Oracle (ORCL) “given ease of use, scalability and utilization benefits.”