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Stocks Hits Fresh HIghs, but Holiday Sales Disappoint
Posted On 01 Dec 2014
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U.S. Markets rallied last week into the end of the month as declining rates in Europe, Japan and China combined with robust earnings kept a floor under equity prices. The Dow posted yet another record high at 17,828 on Friday while the S&P hit an intraday peak just shy of 2076, aided by spillover from gains in Asia and Europe along with plunging oil prices. Concurrently, Treasury yields continued to move south, with the 10-year note falling for 6 consecutive sessions to 2.165%, the lowest since the surprising October 15 rally.
The early focus this week will be on the long holiday weekend’s spending data along with “cyber Monday” sales. Hopes for an improving trend helped boost retail shares Friday and overshadowed weakness from oil producers. However, reports of declining sales over the Black Friday weekend could erode equity prices. Poor weather may have lightened traffic in the Northeast and South as well. Regardless, it will be hard to interpret traditional “Black Friday” and weekend sales given the various discounting strategies employed this year as many stores opened early. Additionally, on-line shopping, including an increase in mobile use, continues to steal buyers from brick and mortar stores.
This week’s calendar is crowded with several key economic reports, including ISM data, vehicle sales, trade, and productivity, with all capped off by the nonfarm payroll release. Forecasts suggest the data will be consistent with a slowdown in growth in Q4 from the above average pace set in Q2 and Q3. Additionally, the Fed’s Beige Book is due and is expected to reiterate moderate growth and subdued wages and prices.
The November nonfarm payrolls report is expected to sustain the signs of improvement seen during the year, though no significant uptick is forecast. The mean gain is expected to be 225k, little changed from the 214k increase in October, but slightly below the 229k average for the year. Risks to the data are to the strong side given the declining trend in jobless claims. Meanwhile the unemployment rate is expected to hold at 5.8%.
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