Weekly Update – November 26, 2012

Equities ended the abbreviated week on a bullish note – with the S&P 500 having its second best week of the year – boosted by positive retail sales estimates and upbeat economic reports out of Europe. For the week, the S&P 500 gained 3.62%, the Dow gained 3.73%, and the Nasdaq gained 3.99%, erasing some of the losses we saw in previous weeks.[i]

Although the holiday shopping season is just beginning, early information suggests retailers can expect a good showing this year. A recent consumer survey by Deloitte suggested that shoppers would spend an average of $286 over the holiday weekend, which is a 28% increase over a similar survey last year. Additionally, the National Retail Federation forecasts holiday sales to grow 4.1% over last year. This is good news for retailers, who expect to make between 40-50% of their profits during the holiday shopping season. [ii]

Hoping to goose the start of the shopping season, some retailers began offering Black Friday deals on Thanksgiving Day. Interestingly, the promotional push may have stolen sales from Black Friday itself. However, if Thursday’s numbers are added to Black Friday, stores still saw a total increase in sales of almost 1% over 2011, and store visits increased 3.5%, indicating that consumers are feeling confident and want to spend money.[iii]

The fiscal cliff is still very much on everyone’s minds, and despite reassuring jawboning by lawmakers, we don’t know how likely it is that we will see a resolution by Christmas. Federal Reserve Chairman Ben Bernanke fanned the flames during a speech last week by commenting that if a resolution is not reached, the U.S. economy will slide into recession. If that were allowed to happen, he does not believe that the Fed has the tools needed to help and that the economy would be on its own.[iv] While this isn’t a happy thought, it’s clear that Bernanke is using his bully pulpit to push lawmakers into action. His message is clear: “Make it happen, or you’re on your own.”

Monday of this week is widely known as “Cyber Monday,” the largest online shopping day of the year. As workers return to their desks after the long holiday weekend, many are still in shopping mode, and retailers offer online specials to lure them away from brick and mortar stores. It will be interesting to see if Cyber Monday numbers are as encouraging as Black Friday’s. Also this week, analysts will be turning their attention to the state of economic reports being released, including GDP, employment data, and consumer confidence.

ECONOMIC CALENDAR:

Monday: Dallas Fed Mfg Survey

Tuesday: Durable Goods Orders, Ben Bernanke Speaks at 8:30 AM ET, S&P Case-Shiller HPI, Consumer Confidence

Wednesday: New Home Sales, EIA Petroleum Status Report, Beige Book

Thursday: GDP, Jobless Claims, Pending Home Sales Index

Friday: Personal Income and Outlays, Chicago PMI