What's ahead for the stock market

Important earnings are due from Best Buy, FedEx, General Mills, Oracle and Research In Motion. The Fed will weigh in on the economy's health in a week of big economic reports.

By Charley Blaine Dec 10, 2010 9:04PM
Charley BlaineUpdated: 8:38 p.m. ET

For all the noise about the extension of the Bush tax cuts this week, stocks behaved in a stately way, rising quietly until, almost without warning, investors found themselves looking at a decent week.

In other words, they made a little money. The Dow Jones industrials ($INDU) gained 0.3%. The  Standard & Poor's 500 Index ($INX) rose 1.3%, and the Nasdaq Composite Index ($COMPX) was up 1.8%.

Next week may well be noisier. There are important economic reports and events coming up, including a Federal Reserve meeting and an important tax vote, plus earnings reports from the likes of Best Buy (BBY), Hovnanian (HOV), FedEx (FDX), General Mills (GIS), Oracle (ORCL) and Research In Motion (RIMM).

And this will be the last full week of trading before we get into the holiday season.

Trading volume will fall off rapidly the week of Dec. 20, with markets closed on Friday for Christmas Eve, and it will be low right up to Dec. 31, also a Friday. But the low volume will also leave the market vulnerable to more-than-the-usual volatility. So, your best bet is not to pay too much attention to the results of those two weeks.

Better to pay attention to what happens between now and New Year's. Here's why.

Article continues below.
The results between now and New Year's may hint at what may happen in 2011.

In 2007, the market fell back between Dec. 7 and Dec. 31, with the Dow down nearly 3% in that time frame and the S&P 500 off 2.4%. In 2008, the two indexes fell 33.8% and 38.5%, respectively.

In 2008, even as the financial crash was in full flower, the Dow, S&P 500 and the Nasdaq rose 1.7%, 2.7% and 2.4%, respectively, Dec. 12-31.

The 2009 market ended with the Dow up 18.8%, the S&P 500 up 23.5% and the Nasdaq up 43.4% for the year. And that was AFTER falling 25% or so between Jan. 1 and March 9.

It happens, of course, that the market has enjoyed a huge rally since bottoming in July. The Dow was down 7.1% for the year on July 2 and is up 9.4% now.

Momentum like that may carry into 2011. Plus, the third year of a presidential term is usually the best for stocks.

Markets for the week



12/10/2010

12/3/2010

% chg.

YTD chg.
Dow industrials

11,410.32

11,382.09

0.25%

9.4%
S&P 500

1,240.40

1,224.71

1.3%

11.2%
Nasdaq 

2,637.54

2,591.46

1.8%

16.2%
Russell 2000

776.83

756.42

2.7%

24.2%
Crude oil 

$87.79

$89.19

-1.6%

10.6%
(per barrel)











U.S. Dollar Index 

80.07

79.41

0.8%

2.4%
10-yr. Treasury

3.30%

3.02%

9.2%

-14.2%
Gold

$1,384.90

$1,406.20

-1.5%

26.3%
(per troy ounce)












What next week may bring
The week ahead will set up the year-end performance. There aren't a lot of earnings on tap, but they are revealing. Here are the earnings reports to watch:

Monday: Best Buy and Hovnanian. The electronics retailer raised its full-year guidance in September, and indications are that the holiday shopping season started strongly. The commentary on its fiscal-third quarter earnings will be key. The important piece of Hovnanian's report, which comes after the close, will be its new orders and cancellations.

Wednesday:  Joy Global (JOYG). This company will tell us what global demand for mining construction equipment is. In other words, Joy Global will offer a clear view of China's economic health. China is heavily investing in coal projects.

Thursday: FedEx, General Mills, Oracle, Research In Motion and office-furniture maker Steelcase (SCS).

FedEx also will help round out the picture of the holiday shopping season as well as the domestic and global economy. General Mills will tell us if food processors are facing inflationary pressures. Oracle, Research In Motion and Steelcase will give us a view of corporate spending.

Research In Motion has the most to prove. It needs to show that its BlackBerry line of phones has staying power against Apple's (AAPL) iPhone and phones that use Google's (GOOG) or Microsoft's (MSFT) operating systems. (Microsoft is the publisher of MSN Money.)

Even though Steelcase cut its fiscal-third-quarter guidance, Wall Street is hopeful about its prospects. Shares are up 56% since August.

The Fed, manufacturing, inflation and housing
The economic events start in a big way on Tuesday.

The big kahuna will be the Federal Reserve's decision on interest rates and monetary policy, due at 2:15 p.m. ET. The Fed has been highly criticized by China, Germany and other exporting countries because they fear the central bank's plan to buy in $600 billion in bonds by June will push the dollar lower, hurt their markets and cause inflation.

Republicans are terrified that the Fed is just being reckless.

What has happened since the Fed announced its plan in November is that the dollar has risen, as have interest rates. Gold is nearing record highs, silver is at 30-year highs, but crude oil has continued to be range-bound.

It is, however, so early in the plan's execution that one can't make a conclusion with any real statistics.

What the Fed will probably say is that it will complete the plan. It won't change interest rates. It will suggest that the economic recovery is proceeding, but joblessness remains a national crisis.

Also due next week:

Retail sales for November, due Tuesday from the Commerce Department. Nomura Securities see this report showing a solid 0.7% gain. Consumer confidence has picked up, and there is some evidence of life in the jobs market. Ford Motor (F) announced this week it is expanding a Louisville, Ky., plant.

Producer Price Index for November, due Tuesday from the Labor Department. This will help define the food inflation issue. The price of wheat is up 43% this year, largely because of a Russian drought. But droughts like that affect livestock feed prices and livestock prices overall.

Consumer Price Index for November, due Wednesday from the Labor Department. This report will also offer a sense of whether inflation is likely to be a serious problem. It may not have appeared much at the grocery shelves yet. Gasoline jumped 10.7% in October, according to AAA's Daily Fuel Gauge report, but only 1.6% in November.

Industrial production for November, due Wednesday from the Commerce Department. This is likely to be flat.

Empire Manufacturing Survey and Philadelphia Federal Reserve Bank's manufacturing index. Both for December. The first is due Wednesday from the New York Federal Reserve Bank; the latter comes Thursday. There is some worry with these. New York's October report was weak; Philadelphia's was stronger. The questions is: What's the trend?

Initial jobless claims, due Thursday from the Labor Department. The trend since summer has been for a slow but steady decline. Claims coming below 400,000 will be very bullish. 

Housing starts, due Thursday from the Commerce Department.  This should show improvement from a lousy report in October that was due entirely to a big decline in multifamily construction. Most economists see a modest gain as multifamily starts and permits rebound. Single-family construction will probably be flat and near record lows. Only a rebound in jobs and getting foreclosures sold will set up a real housing recovery.


28Comments
Dec 11, 2010 7:24PM
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About 70,000 Washington residents who have limited English may lose access to interpreters during medical visits under a proposed budget cut.
This is the kind of waste are government is fostering in order to be politically correct - learn English or Devil
Dec 11, 2010 9:34PM
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to tumbleweed:  do some searches in history. When taxes are cut, business always picks up.
If the government gets the money the percent that gets recycled into revenue stream is abysmal. I have much more confidence with business people keeping their earned profits and growing what they do. No business will sit on profits IF investing back into the company will grow it.  Do you like seeing so much of your taxes taken out every paycheck( if you work)? Business growth means more jobs, government growth means more taxes.

Dec 11, 2010 3:14PM
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Glad. I agree with your finding value in things that are priceless.  I grew up  on a farm, gardening, breaking horses, trapping and hunting as a youth, etc.  Very clear on that topic.  If that is clear to you, why spend time spreading fear here?  You must have a agenda?  Your sentiments, reminiscent of Y2K, are definitely out there.  Comical.  Maybe it's intent?  But truly show a basic lack of confidence in yourself and the world we are living in.  IMO.  Fine is fine.  We decide that.  If we are honest with ourselves.   It sounds like you want "it" to fail, (the outside world), that is a little perverse to me.  Either in your "wanting" or your promulgation of the fear.  Why do that if you are so satisfied with your simple life and deep understanding about what matters?  If we want to acknowledge the vulnerability we all live in, we need to just look at our bodies, or this whirling ball of water, we all ride on.  We need not focus on shiny metal or paper.  It is a elaborate game we play, for too short of a time.  Maybe your point? Which I respect, completely.  Nothing beats fresh berries!!!
Dec 13, 2010 2:16AM
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Buy, buy buy and then cry, cry, cry! Crying
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Full speed ahead. After all, it is bonus season for the thieves and the fed/financial mafia will continue to manipulate stocks higher.


Let the good times roll.

Dec 12, 2010 7:43PM
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active

 

no, now is not the time to take stimulus away, my dissent was more to do with the statement cutting taxes always mean jobs.  Good fiscal policy to match what is going on with the current economy is much better for our future job situation.

 

dunnunder

Is it hard travelling with the Westboro Baptist church and post on MSN all the time?

Dec 12, 2010 6:03PM
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Hot  ignatius (i went to jesuit hs, college, and grad schools), while i agree with your basic outrage over the national debt, i disagree with your concerns about continuing the cuts for the time being. one lesson learned from cutting money supply off during the great depression is that you don't put the patient on a diet and exercise program while they are still in the recovery room immediately after open heart triple bypass surgery.

 

we can address these issues in 2012 when the economy is back on a sustainable path to recovery.  patience.

Dec 11, 2010 2:55PM
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Hot great post dharm.  some are missing some central facts about the fed QE to infinity actions:

 

1.  an appropriate inflation rate is targeted by the fed as a basic monetary tool.  they do this because inflation (think growth) trumps deflation (think depression) by a long, long shot.

 

2.  the concept is to foster low interest rates, weaken the dollar thus fixed income money (and that cash next to glad's shotgun under the mattress) moves into stocks and our export economy takes hold.  rising stock prices then create a wealth effect, investors gain confidence and begin to spend, which creates demand and thus jobs and a sustainable economic recovery.

 

export jobs due to weaker dollar and regular jobs due to revived demand for goods and services:

 

BAM!  BAM!  both barrels of that Ben Bernanke QE shotgun and the US is saved from a stagflation japan-style lost decade.  the man is a genius. 

Dec 11, 2010 2:33PM
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Glad/mwfic.  I am "glad" I am not seeing that were I live.  Busy, busy, busy.  Must be regional?  "Glad" to here you are prepared, for the worst.  I thought we got through that, already?  You obviously haven't?  I am "glad," I have been a contrarian all year,  stock gains (tremendous), refies, saving 3% interest off mortgages, plentiful work.  Simple lifestyle.  I am "glad" I take a middle of the road approach to life, instead of extremes, "glad" I don't live in so much fear.  "Glad" there are people like you, because you make me "glad" to be me.   Take care.
Dec 11, 2010 12:18PM
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why are interest rates at 0% or at 1% or how the 'H' did they get below 5% in the first place, why did congress allow this to happen.....the feds encouraged this to happen and when the economy was hotter than the sun it's self.......anyone back in '04 or '05 say to them selves what the 'F' are they doing lowering the rate or did they just go and take out a third and fourth mortgage???

if there is any positive b.s. story on msn money about how well the x-mas sales figures are....THE FACTS ARE FIXED no way in heII can the figures be good without a huge downside to it.......lets say credit debt!

Dec 11, 2010 7:33PM
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Active IRA

BAM!  BAM!  both barrels of that Ben Bernanke QE shotgun and the US is saved from a stagflation japan-style lost decade.  the man is a genius. 
So was Bernie Madoff until people (China) stop buying his paper and the ponzi scheme collasped Smile
Dec 11, 2010 4:54PM
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Glad.  You and I have a very different understanding of Truth.  I seek and try to live in it, as you obviously do.  My version, is grounded in uncertainty (not 3 steps), which for me is ripe with possibility.  So much is possible, billions of things happening simultaneously, without a hitch, to sustain me and billions of others, on this planet successfully each day.  Do we do a good job as humans understanding this remarkable achievement?  Or do we live in individual fear instead?   I am realizing my own judgment, towards you.  I have no right to convince you otherwise.  I apologize.  Have a great Saturday, enjoy those berries!!
Dec 13, 2010 11:39AM
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cheers. (leinenkugels - chippewa falls, wisconsin - "fireside nut brown" beer)
The brewery is not more than 15 minutes away from me, they have great tours with free tasting at the end. :)
Dec 13, 2010 4:40AM
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Thumbs up  hava, john maynard keynes, ben b. and myself are with you philosophically during normal market cycles.  this is a tragically, hugely abnormal market cycle that saw us literally teetering on the brink of GLOBAL financial armageddon in late 2008/early 2009.

 

you can take your simplistic political potshots again and again, and i will remind you again and again that the US economy is terribly weak and in the recovery room.  you want to take ham-handed, ill-timed measures at fiscal austerity and tax normalcy and debt reduction that should have been implemented BEFORE the patient hit the ER.  you will just have to wait a few years until the patient can ambulate under it's own power once again.

 

patience is a virtue.  in poker, love, childrearing and also in economics economics.

 

p.s. you ever read/watch "shock doctrine?"  eye-opening stuff.   

Dec 13, 2010 12:29AM
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Active IRA Smile  Forget the perpetrator and examine the mechanisms at work.  The US Government and you argue for growth so that you can pay off the newcomers with devalued dollars else if growth stops you have nothing to offer.  No difference from a Ponzi scheme; doesn't matter what pedigree the dog has it still has fleas.  Someone once said the last dying gasp of capitalism would be unrelenting welfare (via socialist's progressive taxes).   Yes, Ben will screw the savers and force them to take risk and you want all the dollars to go for consumption so that the Ponzi pyramid continues.  Gambling and Ponzi schemes are legal as long as government can use revenue to pay off the underachievers.  I'm game and have made 13% a year investing for last twelve years either with CDs or Blue Chip growth paying dividends.  Philosophical discussions are just entertainment.
Dec 12, 2010 10:02PM
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Hot  got it.  right with you ignatius.  the national debt was under $3 trillion pre-reagan and the average CEO was making about 43 times what the average worker made.  lo, these many years later after his tax revolution (good at first but then he went over to the dark side) and the bush fiasco we were over $10 trillion in debt and the CEO's were making over 400 times the average worker.

 

this huge transfer of wealth was orchestrated by milton friedman, the crony capitalists, the military-industrialists, the modern robber-baron families out of harvard/yale, and of course their all-too-willing partners in crime, the bankers and the incestuous politicians in washington.  this must all come to an end. 

Dec 12, 2010 9:49PM
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Thumbs up lmao.  great comeback post dunn.

 

 Beer mug cheers. (leinenkugels - chippewa falls, wisconsin - "fireside nut brown" beer)

Dec 12, 2010 7:32PM
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for you penance, shout "BE GONE SATAN" 100 times out your front door
okay i did it; all i got in return was snowballs thrown at me, thank god none were yellow in color!Surprised
Dec 12, 2010 5:57PM
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Sick  hava, so your comparison is between a very sick, greedy, sociopath living out the rest of his sad life in prison and that of an extremely educated (harvard and mit), bright, elected by two administrations (served as dubya's chairman of economic advisors), decorated, experienced educator, and concentrated expert on the root causes of the great depression and now a modern-day American hero.

 

not only is this inaccurate and nonsensical, but it makes me question your entire agenda.  strange. 

Dec 12, 2010 5:41PM
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Open-mouthed  chin up tumbleweed.  you are not looking at the macro (big) picture.  these tax cuts are crucial to the economic recovery and 'bama was forced to give tax welfare to the wealthy for two more years in order to accomplish the greater good of continued unemployment benefits.

 

you are neglecting to note that these tax cuts will be spent, thus generating a huge ripple effect of increased consumption, more jobs, and thus increased sales ax collection and income taxes.  this had to be done for the short term as a sound keynesian solution.

 

it's all good.  we will start taking down the rich elites in 2012.  by the way, have you read or watched "shock doctrine?" - a real eye opener on the fiend milton friedman.

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