| NEW YORK
NEW YORK Nov 29 A week packed with data awaits
investors eager for fresh clues on when the Federal Reserve will
start to trim its stimulus program, as traditionally bullish
December kicks off with the S&P 500 poised to mark its best year
Traders will also sweep through sales data from retailers
after the long Thanksgiving weekend, which kick-starts the
holiday shopping season. Vice President Joe Biden's trip to Asia
will increase the focus on a standoff pitting China against
Japan, South Korea and the United States over air routes over
the East China Sea.
Employment numbers will be the highlight as traders
second-guess what the data will mean for the Fed and its
announced intention to gradually reduce its $85 billion in
monthly asset purchases, which have lit a fire under the stock
market this year.
The Fed has repeatedly said its stimulus remains
data-dependent, leading traders to treat soft data as a bullish
market catalyst that guarantees Fed stimulus.
"The whole market is trying to channel the Fed," said Quincy
Krosby, market strategist at Prudential Financial in Newark, New
She said volatility is to be expected as the reaction to
data is more a "let's interpret how the Fed interprets it"
rather than what it means for the economy.
Nonfarm payrolls for November on Friday will cap three days
of jobs data that includes ADP's November report on
private-sector payrolls on Wednesday and weekly U.S. jobless
claims on Thursday.
Economists expect the U.S. economy to have created 185,000
jobs in November, down from 204,000 in October, according to a
Reuters survey of economists.
Other major economic indicators due next week include the
Institute for Supply Management's data on the U.S. manufacturing
and services sectors, with the ISM's factory index expected on
Monday and its services index due on Wednesday. Domestic car and
truck sales are scheduled for release on Tuesday, followed by
U.S. factory orders on Thursday and the preliminary reading for
December on consumer sentiment from Thomson Reuters/University
of Michigan on Friday.
November marked the third consecutive month of gains for the
Dow Jones industrial average, the Standard & Poor's 500
and the Nasdaq Composite. The S&P 500 ended
slightly lower on Friday, but closed its eighth positive week in
a row, its longest weekly stretch of gains since a nine-week run
from November 2003 to January 2004.
The benchmark S&P 500 is up 26.62 percent so far this year,
which would make its best yearly gain since it climbed 26.67
percent in 1998.
RETAILERS ON CENTER STAGE
Consumer views are a key data point as the most important
shopping season of the year, when some retailers make nearly
half of the year's profits, gets under way.
The National Retail Federation expects that up to 140
million shoppers hit U.S. stores over the Thanksgiving weekend,
slightly more than the 139 million who turned out last year.
If reports start to show the numbers don't add up, retail
stocks may feel some heat.
"The market seems to be focused on the consumer and on
retail sales. They're going to dice up and analyze what sales
figures have been for this weekend," said Bruce Zaro, chief
technical strategist at Delta Global Asset Management in Boston.
He said there's special interest in this season because
there are fewer shopping days and retailers are significantly
reducing prices to attract shoppers.
This year's holiday shopping season in the United States is
one of the shortest in years, with less than 30 days between
Thanksgiving and Christmas.
Zaro said that however important sales and traffic numbers
are, soft data should be treated carefully.
"I'm not sure it's a proxy for the overall market. There are
areas of the economy doing quite well and areas of the market
that are doing well beyond retailers, which are relatively
Regardless of how strong the numbers are, consumer stocks
could be due for a slowdown. Retail stocks have underperformed
the S&P 500 in the period from Thanksgiving to Christmas for the
past three years, according to data from Bespoke Investment
Group, an investment research firm in Harrison, New York.
Bespoke's data show that since 2000, the S&P 500 has
averaged a gain of 1.7 percent during that key period, with
positive returns in all but three years. Retail stocks have
averaged a gain of just 0.8 percent in the same time frame, with
positive returns during six of the 13 years.
A CHILL FROM CHINA?
During Biden's visit to China, Japan and South Korea next
week, he will seek to ease growing tensions in the region. Last
week, China established a new airspace defense zone over the
East China Sea, including the islands at the heart of its
dispute with Japan.
China scrambled jets on Friday in response to two U.S. spy
planes and 10 Japanese aircraft, including F-15 fighters,
entering its new air defense zone, state news agency Xinhua
"This is a little bit of a brush fire, and I'm hopeful it
will de-escalate in a hurry," said Jim Russell, senior equity
strategist for U.S. Bank Wealth Management, in Cincinnati.
"It's not the season to have a geopolitical distraction on
what is already a shortened and highly promotional shopping
season," he said.
(Wall St Week Ahead runs every Friday. Questions or comments
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