What's ahead for the stock market
Because of Thanksgiving, it's a short week. But earnings are due from Hewlett-Packard, Deere and Tiffany. Look for key reports on the economy, personal income and housing.
Normally, you don't expect much to happen at Thanksgiving. Everyone on Wall Street is trying to get away for a long weekend. Volume falls, and the week ends with a short day.
Investors, however, should pay attention to the week ahead. There is a huge earnings report due on Monday: Hewlett-Packard (HPQ) reports fiscal-fourth-quarter results after the close. Campbell Soup (CPB), Hormel Foods (HRL) and J. Crew (JCG) report on Tuesday and Deere (DE) and Tiffany (TIF) on Wednesday.
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The week includes key reports on gross domestic product, housing and jobless claims. Tuesday will bring the minutes from the Federal Reserve's Nov. 2-3 meeting. This will help investors gauge the disagreements about the central bank's controversial $600 billion plan to support the economy.
That's a lineup that can produce some drama.
While the major averages finished this past week basically flat, the markets offered their own drama: a big sell-off on Tuesday because of worries about China and Ireland and a big relief rally on Thursday.
And there was the return of General Motors (GM) as a public company, thanks to a big initial public offering that saw the size and the price rise substantially.
When the week was done, the Dow Jones industrials ($INDU) were up a whopping 11 points to 11,204. The Standard & Poor's 500 Index ($INX) gained a whole half-point to just below 1,200. The Nasdaq Composite Index ($COMPX) was down by all of nine one-hundredths of a point to 2,518.
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- GM's public offering, even if the stock struggled to hold above $34.
- Thursday's big rebound.
- A second week in a row with initial jobless claims under 440,000.
- Some steps toward rescuing Ireland and its teetering banking system.
- Better-than-expected U.S. retail sales.
- A robust report on manufacturing in eastern Pennsylvania, Delaware and Maryland.
- Lack of resolution about Ireland's banks and government debt.
- Escalating rhetoric between Chinese officials and their U.S. counterparts, especially Federal Reserve Chairman Ben Bernanke.
- Weak housing starts, especially multifamily starts.
- A weak report on manufacturing in New York state.
- Higher interest rates.
What to look forward to next week:
Earnings should continue to be positive
Retailers -- especially high-end retailers -- in the past few weeks have beaten estimates for the most part, and many are sounding like AnnTaylor (ANN) CEO Kay Krill, who pronounced herself "very positive about the holiday season."
That said, companies who market to lower-income shoppers concede that shoppers are very cautious and likely to wait until the big discounts start to show up.
But retailers aren't alone. Bank earnings are higher. Automakers are seeing business steadily improve. Technology companies are seeing decent business, although Cisco Systems (CSCO) is worried about the next few months.
In short, there's talk that the recovery, which went to sleep over the summer, is reawakening.
So, after Monday's close, Hewlett-Packard is expected to report $1.27 a share in earnings, up from $1.14 a share, with revenue up 6.4% to $32.75 billion. Look for strength in its consulting business and servers.
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Others due to report include:
Cracker Barrel (CBRL), due before Tuesday's open. The estimate is 91 cents a share, up 17% from a year ago. Revenue is expected to rise 3.3% to $600 million. The stock closed at $56.09 on Friday after hitting a 52-week high of $56.24.
Hormel Foods, due before Tuesday's open. Look for 79 cents a share, up slightly from a year ago. Revenue of $1.88 billion should be up 12% from a year ago. Its shares hit a 52-week high on Friday.
Campbell Soup, due before Tuesday's open. The company has already warned that results will be lower than a year ago. The stock has held up fairly well. It peaked at $36.66 in early November and is down only 5.5% since then, despite the warning.
Deere, due before Wednesday's open. The Street is expecting profits to jump from 23 cents to 94 cents a share, with revenue up 31.7% to $6.2 billion. Farm prices are high, and growers are expected to be in the mood to buy.
Tiffany, due before Wednesday's open. Look for a 12% earnings gain and a 9.2% revenue gain to $653.3 million. Tiffany's growth in the last two years has come from outside the United States. Look for comments on the American shoppers' willingness to spend.
Will the economic reports confirm the good cheer?
Maybe. But there are two outliers to what the reports will tell us:
First is the risk that the war of words between Bernanke and others about his $600 billion quantitative easing plan will get worse. Bernanke's plan is risky, but he believes strongly that the domestic economy will stall without it.
Many officials elsewhere are appalled by the plan because it has dropped the value of the dollar and is forcing cash away from banks and into investments both domestic and foreign. It's creating inflationary pressures in Asia, who depend on the United States to sop up their excess production. China has been forced to slow down bank lending and may boost interest rates. China is also facing substantial food inflation.
It's under domestic attack by Republicans and Republican-leaning economists who fear the plan will unleash inflationary pressures here eventually.
We may see this domestic conflict in the Fed minutes due Tuesday at 2 p.m. ET. At least one Fed governor, Kevin Warsh, who has worked on Wall Street, thinks the plan won't work, although he did vote for it.
(You will be able to find the minutes here.)
The second, more pressing question is how a rescue plan for Ireland is structured. Ireland's government bonds are under deep pressure because the government agreed in the financial crisis to back the losses of its big banks.
A plan to shore up the bonds may require deep spending cuts and -- horrors! -- corporate tax increases, which the Irish don't want to do. The Irish economy grew rapidly in the last 20 years because it offered companies generous tax incentives, including low corporate tax rates.
Here's what else is due:
Third-quarter gross domestic product, a second estimate, due Tuesday from the Commerce Department. The original estimate was 2%. Nomura Securities sees it revised up to 2.3%. IHS Global Insight, a big economic consulting firm, expects 2.2%.
Existing-home sales for October, due Tuesday from the National Association of Realtors. The consensus estimate is for an annualized sales rate of 4.48 million units. IHS Global Insight expects a 4.2-million-unit rate. Nomura sees a 4.6-million-unit rate. Look to see how large a share of purchases are foreclosures.
Durable-goods orders, due Wednesday from the Commerce Department. Expect a decent gain, 0.5% or better, fueled largely by aircraft orders.
Personal income spending and income for October, due Wednesday from the Commerce Department. There are hints that employers are boosting hours worked and even hiring here and there. So, most analysts expect a gain.
Initial jobless claims, due Wednesday from the Labor Department. This is the closest indicator that tells where the job market is. The past two weekly reports have been the seasonally adjusted claims rate at under 440,000. Another such report will be a decent signal that the recovery is picking up steam. Claims were at 504,000 in mid-August and well north of 600,000 a week through most of 2009.
New-home sales for October, due Wednesday from the Commerce Department. This will be a depressing number, with an annualized sales rate of around 320,000. That will be up slightly from September's 307,000-unit rate. But all of these rates are lows since data collection began in 1961. Until the foreclosures are sold off, don't expect much improvement.
Absolutely Glad! I'm also happy to be 1 of the smart ones to have figured out this corrupt system years ago and am reaping the benefits. I just wish the government would send me more money though. You should see my list of things I need and want to buy.
In other news, the FBI is now investigating "rampant insider trading scams" LMAO What else could anyone expect from "Fraud Street" Crash and burn Wall Street!
pssst, glad, spending decisions are discretionary i.e. under you control, we call this a "budget"
buzz such a smarty! yep, that is why 'bama took the banksters to the woodshed for a public whipping and championed fin-reg to keep them under control and a pay czar to limit pay - such a good buddy-buddy to those nasty banksters!
pac- the vikes will break your heart this weekend, and you might want to consider that the emerald isle, with their low tax rates, built up a mountain of debt just like the US did under reagan/bush/bush - it's easy to have low tax rates if you let your national debt skyrocket until you go bankrupt. NEWS FLASH: Moody's has threatened to reduce the US' AAA rating to AA (unheard of) if they do not raise tax rates to a sustainable, reasonable level ... c'mon, no more Guinness for you.
why tea party, why ...
those days are over david: the American dream of a brick house, two cars, a flat screen and unlimited cell phones for every American was a mirage provided by politicians to get elected and rich - now all of the foolish voters need to finally pay the tab - get your wallet out please
have a Happy and Blessed Thanksgiving week one and all, i may disagree with ya, but i got nothing but for ya.
Ben Bernanke needs to send us all no limit credit cards so we can charge all that stuff. That way the banks (Obama's buddies) can make a fortune.
aye, dead on. and, if ye don't mind, i'll set us up w' a couple nice pints o' guiness, SLAINTE!
i am right with you on all of that buzz. i certainly do NOT think that much of these moves has been effective due to the compromises required AND 'bama is certainly a political animal out of chicago where he must pay back a host of debts he owes, including a lot of campaign finance from wall street. i just think he is over-criticized for his role in trying to fix this mess.
with all of that said i think they are making strides in the right direction. we just need to not let up and keep tightening the noose. let's kick him out in 2012 and run maybe a romney/edwards ticket, or trump, or maybe paul/paul.
Ireland is bankrupt and that makes it a good example of tax cuts and borrowing?
The answer is simple, they aren't figured into the headline unemployment numbers at all. I think that the U-6 unemployment number is probably closer to the actual figure. Another telling number is the home delinquency and foreclosure number. About one in six mortgages fall into that category. That number as a percentage comes very close to the U-6 unemployment number.
I don't think the banking regs will bother the big banks at all. Apparently you haven't read them. Yep, that's just what we need unaccountable czars. They sure are doing a wonderful job limiting those bonus paychecks. The news stories will be out very soon on the monster bonuses.
The Irish problem is the same as the American problem...too much spending. According to usdebtclock.org we're already over 94% debt to GDP ratio and our unfunded liabilities exceed our assets. If I ran a business and produced numbers like that, I'd be kicked to the curb and handed a lead parachute yesterday.
OK, so we know at least one cause of the rapid growth of the Irish economy over the last 20 years... why is it in such a parlous state now?
why democrates why
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