Santa Claus wigwags to the crowd during the Macy’s Thanksgiving Day Parade in New York City.
Getty Images
It’s Thanksgiving time, and investors’ thoughts retrace ones steps to holiday shopping and a year end Santa rally in the stock market.
Some analysts think both could be mellifluous good this year.
While Black Friday has probably lost some of its claim as the launch of holiday department storing, the Friday after Thanksgiving could provide an early glimpse of how much the consumer will spend this year. The Resident Retail Federation estimates sales should grow by about 4% in the holiday shopping season, enough to husband the economy rolling along.
JP Morgan analysts, in a note Friday, said they expect sales to be up 4.9% during the furloughs, much stronger than last year, when sales gained just 1.9% and shoppers were prevented by a major sell off in the stock market.
As for the stock market, it continues to reach for new highs, and some analysts say that shouldn’t shift as the calendar progresses deeper into a seasonally strong time of year for stocks.
“I actually like adding to justices through the rest of the year,” said Cayman Wills, global head of equities at J.P. Morgan Private Bank.
Wills implied she is looking for a better economy, with now no concern about a recession next year. As a result, she began adding to industrials in September and now wants manufacturing data to turn around, supporting her view. She said, if ISM manufacturing data improves Dec. 2, as she expects, industrial Pty stocks should go even higher.
The coming week is often a slow one, with markets closed Thursday for Thanksgiving and cache exchanges closing down early on Friday. Fed Chairman Jerome Powell speaks Monday night on the economy, and there are some productive reports worth watching, including durable goods and personal income and spending Wednesday.
A few final earnings broadcasts are also expected, including Best Buy, HP, and Dell.
In the bond market, the Treasury auctions $113 billion in 2-year, 5-year and 7-year notes Monday, Tuesday and Wednesday.
Investors are also chaperon impeachment proceedings in the House, but analysts do not expect the potential impeachment of President Donald Trump to affect markets, since there is scrap chance he would be convicted by the Republican majority in the Senate.
Developments on trade talks between the U.S. and China, are by far the most foremost event for markets.
“It’s a call on trade in our view. You can’t really predict what Xi and Trump will do,” said Michael Schumacher, steersman rates, at Wells Fargo. The 10-year Treasury yield was at 1.75% Friday, from a high of 1.95% on Nov. 12. Grades have moved lower as concerns have increased that the U.S. and China will fail to reach a deal by Dec. 15, forestalling off a new round of tariffs expected to take effect that day.
But stocks have not reacted as much to disappointing trade headlines, and are as an alternative looking forward to a new round of talks between U.S. and Chinese officials. The S&P 500 was roughly half percent away from its all fix high Friday.
“Trade is the nugget that helped lead the market higher,” Wills said. “In August we were mercantilism at 16 times [earnings], now we’re at 17.8 times. If the market took out the benefit we saw from trade, it would probably be there 8% lower. That’s not our base case.”
She expects to see some form of a phase one trade deal, and investors determination continue to monitor every headline and tweet about trade talks. U.S. trade negotiators were invited to China to record part in a new round of face-to-face talks, according to the Wall Street Journal. On Friday, Trump said a deal was even.
“I think there will be continued positive momentum,” said Wills, adding that incumbent presidents positive a good economy is important in an election year.
Stocks could ‘turkey trot’ higher
The week around Thanksgiving is usually positive for stocks. “If we were using history as a guide, that means we could see the final leg of this turkey scamper in the week of Thanksgiving where we end [higher], then spend the next week or so digesting the recent gain,” said Sam Stovall, chief investment strategist at CFRA.
Stovall prognosticated there likely will be a Santa rally this year, but the market typically dips in the middle of December in front of moving higher. “December is the best month [for the S&P 500]. On average, it’s up 1.6% and also has risen 76% of the time since Globe War II. It’s the highest price change and the best frequency for an up move of any month,” said Stovall.
Scott Redler of T3Live. com asserted it’s very likely there will be a Santa rally taking the market higher into the end of December. “A lot of analysts prepare a target of 3,200 for this year, but we were a little ahead of ourselves. A week of digestion is welcome. Traders are looking to get sure the market holds 3,070 to 3,090 to give more confidence that the Santa rally could set forth it to 3,200 by year end. The question is can the market hold these levels,” Redler said.
The 3,090 level is the low from this gone week, and the 21-day moving average, a momentum indicator, is at 3,075.
“This week stocks took a little bit of a breather. Next week has a richer reconsider chance of being seasonally strong,” he said. “This week was more of a breather than a break that could be enduring happened on trade talks.”
Retail will dominate in the week ahead, as markets watch the final group of retailer chains report earnings. Dollar Tree, Dick’s Sporting Goods and Best Buy report on Tuesday.
Target in the days week gave positive indications for the holiday shopping season, as did Walmart the week before. But Home Depot softened its sales forecast when it reported earnings, and Macy’s slashed its outlook..
“There are six fewer days between Thanksgiving and Christmas but CFRA does not see this weighing on sales,” said Stovall. “Our analysts require the tight time frame between Thanksgiving and Christmas will be a boon for retailers which have “buy-online-pickup-in-stores” faculties.”
Retail sales are important since the consumer drives more than two-thirds of the economy.
“The peak of the season covers 27 days between Thanksgiving and Christmas compared to 33 days last year, which is the shortest since 2013. Curiously, with Cyber Week and online penetration growing, this is less a risk than the days of yore while the shorter season when one pleases likely lessen the depth of the slowdown in early December,” the JP Morgan retail analysts wrote.
Week ahead annals
Monday
Earnings: Hewlett Packard Enterprises, Palo Alto Networks, Agilent, Jacobs Engineering
8:30 a.m. Dallas Fed creating
1:00 p.m. 2-year Treasury note
7:00 p.m. Fed Chairman Jerome Powell speaks on building on gains from long expansion, Enormous Providence Chamber of Commerce
Tuesday
Earnings: Best Buy, Dell, HP, DollarTree, Autodesk, Box, Hormel, VMWare, Dick’s Rollicking Goods, Cracker Barrel, Bank of Nova Scotia
8:30 a.m. Advance economic indicators
8:30 a.m. Philadelphia Fed manufacturing 9:00 a.m. S&P/Case-Shiller domicile prices 9:00 a.m. FHFA home prices
10:00 a.m. New home sales
10:00 a.m. Consumer confidence
1:00 p.m. 5-year note auction
1:00 p.m. Fed Governor Lael Brainard
Wednesday
Earnings: Deere, DouYu
8:30 a.m. Approve claims
8:30 a.m. Durable goods
8:30 a.m. Real GDP Q3
10:00 a.m. Personal income
10:00 a.m. Pending home sales
1:00 p.m. 7-year note auction
2:00 p.m. Beige volume
Thursday
Thanksgiving Day
Markets closed
Friday
Black Friday
9:45 a.m. Chicago PMI