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.


20Comments
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 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 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 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 11, 2010 6:17PM
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for the amount of money the church of child molesters have invested into the market and the reopening of abuse cases the market should take a huge hit....doesn't it make you all tingly inside reading about it....this is the church that wants open borders!

 

WikiLeaks: Pope refused to cooperate in sex abuse investigation
British ambassador to Vatican also feared anti-Catholic fury over Anglican conversions
Dec 11, 2010 5:25PM
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money money money make the world turn ,  stimulate the economy , create jobs , production of more wealth , it goes round and round
Dec 11, 2010 11:59AM
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Glad Im Not You, while you are correct that QE2 will eventually cause inflation you seem to be missing the whole picture.

 

Let me give you a little different perspective. IMO Bernanke is not loading the banks up with money so they can lend. If that were his true intention then he would be inflating the money supply right away adding to inflation very quickly. This is due to the multiple deposit creation affect. He is shoring up the banks to weather the second wave of foreclosures (ARM’s) that is currently hitting their books. If the banks don’t loan the money keeping it in reserve instead then the multiple deposit creation affect is postponed to some future date when the CASH is no longer needed to shore up the bankers portfolios.

 

I agree with you that Bernanke is creating inflation, but judging from the fact that this bubble is much bigger then the last, it will be at least 4 years before the trend stabilizes starting to free up that money to lend and we will be in a stag inflationary cycle for another reason. What Bernanke calls deflation is really the banks loosing their price support capability for a second time due to being over run with a stock of foreclosed properties.

 

If he doesn’t do this for his buddies they will have to stop metering out inventory and dump housing stock to raise CASH for their reserves. The lenders have been working very hard controlling available inventory to push prices up and re-leverage the consumer back on to tread mills above the market equilibrium at the profit maximizing equilibrium of the lenders.

 

This is not a good thing on a few fronts. First, the consumer is better off without price supports. Second, I’m not convinced that usurious interest rates can stop run away inflation at least not in a timely manor. Third, the FED is adding fuel to the fire that will ignite five or ten years from now adding trillions to the money supply if the individual lenders cannot control their greed by not lending all the QE2 money at prevailing 25% to 30% interest rates that the market will be demanding.     

 

Dec 11, 2010 11:34AM
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joe the pieman must be borrowing from a loanshark.
Dec 11, 2010 3:30AM
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(GNTA) Up 100% today! 52 week high  $20.00 Check it out before Mondays open!!
Dec 11, 2010 10:51PM
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work

 

why didnt these same tax cuts already create jobs, are jobs a lagging indicator that the tax cuts of 2001 and 2003 are working.

 

A little more research into history will show that if you take on too much debt the bond holders will take the rug out from under you.  The 94 tax increase calmed the bond markets about US debt and we had a nice run up in the economy.

Dec 11, 2010 12:00PM
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Glad Im Not You - So buy stock in Joe's Pie company and quit complaining about something you can't change.  Darwin: Only the adaptable survive!
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