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Thanksgiving miracle

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by Peter Switzer

It’s a big week in the USA in more ways than one. First, the very-American Thanksgiving Day happens on Thursday. I have to say that I only understand Thanksgiving through the movies we have been brought up on and some of my favourites have been around this very holiday.

In fact, The Huffington Post wants people to vote on the top 10 Thanksgiving movies and some of the best were Planes Trains and Automobiles, Woody Allen’s Hannah and Her Sisters, Miracle on 34^th Street and who could forget A Charlie Brown Thanksgiving?

This also kicks off the festive shopping season, which will affect stock market attitudes.

So as is the case on most market days, in the good ol' U S of A we must trust and I hope by week’s end I can give them a good old thank you!

Markets are closed Thanksgiving and Friday is a shortened trading day.

Week and year in review

Even though the Dow Jones index dropped three days in a row, it did put on 0.46 per cent for the week and for those who love threes — it was the third week in a row. But that’s the Dow, the broader market indicator —the S&P was down 0.19 per cent, which is neither here nor there in the world of statistics.

The annual increases are interesting with the year-to-date results reminding us that the year started very badly for the bulls before March came along. In fact, the Ides of March were only something that bears should have been worried about.

The Dow is up 17.6 per cent, the Nasdaq 36 per cent and the S&P 500 21 per cent, which makes it look pretty safe to say 2009 was a good year for stocks.

And despite a bit of negativity around last week, the important fear index — or the VIX — finished at 22.32. It did spike higher during the week but has again retreated. Remember a VIX around 13 or so indicates comfortable volatility and it has been as high as the 80s when the financial world looked over the abyss after Lehman Brothers collapsed.

Dollar story

The interesting story of last week was the relative strength of the US dollar. At the moment if the dollar falls, shares rise and vice versa. By the way, it doesn’t always happen that way and I think when the US central bank starts to raise interest rates, the share market could fall but if the US growth outlook is given the thumbs up then both the greenback and the Dow could head in the same direction.

As the US dollar sneaked up, commodity prices fell — oil was down to US$76.72 a barrel — and even gold slipped, but not by much, to US$1,146.40 an ounce after punching through the US$1,150 mark last week.

Earnings watch

It wasn’t a great week for tech stocks — though they are up 50 per cent this year! Dell reported and did not beat expectations while Intel copped a downgrade.

This puts the spotlight on Hewlett Packard who puts its books on show on Monday (Tuesday our time).

At the moment the news is mixed with Gap reporting right on target, a home-goods retailer Williams-Sonoma surprising with good results while a prominent homebuilder disappointing. However, orders did rise 26 per cent beating forecasts, and other homebuilders had similar stories.

Despite all of this up and down stuff, with a bias to the negative, I think, CNBC reported this gem: “JPMorgan upped its target for the Standard & Poor's 500 to 1,160”.

The index finished the week at 1,091, so the charts must be offering the hot shots at JPMorgan some reason to repel some of the small negatives around nowadays.

Keep an eye out

So what are the big watches in this Thanksgiving week? Try these:

Existing homes data comes out on Monday.
Tuesday brings the S&P /Case-Shiller home price index, consumer confidence and a review on the already revealed third quarter GDP figure.
New home sales data comes out on Wednesday.
With some factory readings softening, durable goods orders Wednesday will be important.
Weekly jobless claims data also comes out on Wednesday. These have been around 500,000 but a figure around 450,000 to 475,000 would indicate a turnaround for unemployment. And this could be a real market maker or breaker figure.

Forget a double dip

Trading should be lacklustre with some economists thinking the fourth quarter will be slowed, say at 2.5 per cent growth pace after 3.5 per cent growth on the third quarter. However, others don’t agree and see stronger growth and that’s why the market is so up and down right now.

Importantly, the leading indicators for the US economy are generally positive and are saying: “forget a double dip recession”.

And this is why this Thanksgiving week with so much economic reporting will be one that we could end up being thankful for or not. Many economists think US business investment will kick in and if the US consumer comes out to shop like a true American, then we just might get a miracle on 34^th Street and beyond!

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Monday, November 23, 2009