Dubai, jobs, Black Friday, and Congressional target-practice on Bernanke: the coming week ought to be more fun than the proverbial barrel o’ monkeys!!! Be on watch for possible surprises from a Senate Banking Committee hearing on Bernanke's re-nomination. The hearing could provide fodder for Wall Street at a time when the central bank is facing scrutiny in Congress for its bailout of large financial institutions during the crisis.
In a busy week for data, Friday's employment report for November will be the main event with job losses expected to decrease from October. Investors will also get an early view of retailers during Black Friday – usually the busiest day of the year. Jobs and consumer spending remain the weakest Achilles’ heels du economische.
Last week’s ice-cold colonic from Dubai reminded all that the recovery will be far from smooth. The shocker rattled investors with echoes of the subprime collapse that sent reverberations through global financial markets. Uncertainty over U.S. banks’ exposure had ebbed by Friday's close, but I’d expect the news will sift down to settle around the feet of commercial real-estate developers and financiers here at home in the uncomfortably near future (if not already). "A big part of whether the market's positive trend continues for the next month will partly depend on whether this Dubai World problem does, in fact, mushroom into concerns about the soundness of financial markets," said Michael James, senior trader at Wedbush Morgan in Los Angeles. "At least so far here in the U.S. market, that seems to be shrugged off, but we'll see if we get any more details ... that might put a more cautionary spin to the early problems."
DECEMBER CHEER
December, traditionally one of the best months for stocks, has been good for an average gain of 1.7 percent in the S&P 500 since 1950, according to the Stock Trader's Almanac.
Many analysts don't think there will be any major sell-off before the end of the year as there are institutions still trailing the market who will probably use dips as buying opportunities so year-end window-dressing efforts won’t be either so rushed or crowded. On the other hand, the bears argue that this year's run-up leaves the market in an even more dangerous place than it was in March. PIMCO’s Al-Arian has said the fears of a possible debt default at Dubai World is the catalyst for an "overdue correction" in equities and risk assets.
DATA STREAM
Friday's non-farm payrolls report is expected to show the U.S. economy shed 130,000 jobs in November, easing from the 190,000 that were lost in October, according to a Reuters poll of economists. The U.S. unemployment rate is expected to remain the same at 10.2 percent. Also expected next week are separate reports from the Institute for Supply Management on the manufacturing and service sectors. ISM manufacturing expected to dip to 55.0 in November from 55.7 in October, while ISM services is expected to rise to 51.5 in November from 50.6 the month before. Other data includes pending home sales for October, car sales for November, weekly initial jobless claims and factory orders for October.
T. W. Merryman
Managing Director
Interconti, Limited
(Market Research Analysts)
Chicago, IL 60604
e: intercon@intercontilimited.com
w: www.intercontilimited.com
