What the Dow Says About Car Sales
DETROIT ( TheStreet) -- When it comes to boosting August vehicle sales, Cash for Clunkers gets much of the credit, but the rise in the Dow Jones Industrial Average also played a role.
Continuing research by Jesse Toprak, vice president of industry trends for TrueCar.com, shows that stock market performance is a major factor in determining whether consumers buy cars. Since January 2007, the two metrics have closely correlated more than 85% of the time.
In other words, when the Dow rises or declines from the previous month, auto sales rise or decline proportionally, in relation to the previous month's sales. The correlation reflects not just the direction of the changes, but also the quantity of the changes.
Through Tuesday, the Dow was up about 4%, and vehicle sales are surging, estimated to total more than a million. When the manufacturers report sales on Monday, it should be possible to extrapolate just how much of a role Cash for Clunkers played. Sales were rising even before Cash for Clunkers sales began in late July.For obvious reasons, "the stock market has a huge impact on new vehicle sales," Toprak says. "Even if you don't have money in the market, the first thing you hear in the news is what happens in the Dow Jones index, and if you see a gleam there, it says things are good." Toprak says the correlation has been particularly high since January 2007. Over the past decade, the correlation has been about 50% to 60%, he says. -- Written by Ted Reed in Charlotte, N.C..
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV