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Black Friday, Dubai, jobs top busy Street agenda next week
By Deborah Levine, MarketWatch
Last Update: 6:54 AM ET Nov 28, 2009
NEW YORK (MarketWatch) -- Early results from the U.S. holiday shopping season and the fate of a debt-strapped Middle Eastern conglomerate will likely vie for stock traders' attention in the upcoming week, capped by the monthly jobs report.
Credit, and trouble paying it off, dominated trading Friday and is likely to spill over into early next week as the bulk of investors return from their extended Thanksgiving holiday.
Global stocks, commodities and currencies from commodities-rich countries -- all investments that have risen together this year on the belief the worst of the credit and economic crisis has ended -- all sold off late last week.
The trigger was news a sprawling real-estate conglomerate controlled by the city-state of Dubai was having trouble making debt repayments.
Dubai World owes roughly $60 billion and has payments of billions of dollars due in coming weeks. Instead, Dubai announced a six-month "standstill" on repayments. Read about Dubai World's potential default.
This type of debt extension is considered a default by some bond investors, and brought back memories of the spiraling losses that followed the collapse of Lehman Bros. in September 2008. Bank and insurance shares, down Friday, could be in for more pain Monday as investors sift for details about which banks have lent Dubai World money. Read more on bank exposure to Dubai World.
"With the competitiveness and interconnectedness of the global financial markets, we could still see some major tremors in the markets," said Dan Cook, senior analyst at IG Markets Inc., in emailed comments.
The concerns over lurking losses at global financial institutions overshadowed early, positive anecdotes from Black Friday, the traditional start of the U.S. Christmas shopping season.
Deep discounts, such as a $197 Hewlett-Packard laptop at Best Buy BBY, seemed to have drawn out shoppers, retailers and analysts said. Read more on Black Friday results.
A broader count of sales receipts will become public over the next week.
With personal consumption accounting for about 70% of the U.S. economy, a recovery in consumer spending is seen as necessary to keep driving stocks higher, particularly for investors suspicious the 8-month rally has gone too far. Read more on U.S. stocks and Black Friday.
"Black Friday is going to speak to the income that consumers are willing to give up for discretionary items," said Brett Hyrb, a senior equities portfolio manager at MFC Global Investment Management, who helps manage $2.8 billion in assets.
"It's going to be a critical step in terms of what direction the markets take for the rest of the year.
The market's daily assessment of whether the economy is still on the road to recovery, or has just shifted into reverse, will find plenty to work with next week.
The Institute of Supply Management will release its November survey of manufacturing and service industries; car makers will release monthly auto sales; and three reports ending with the Labor Department's nonfarm payrolls survey will give an update on whether it's becoming easier to get a job. See Economic Calendar.
Staples, Inc. SPLS, Big Lots Inc. BIG and Toll Brothers TOL will report quarterly earnings.
And the Senate will hold a hearing on Federal Reserve Chairman Ben Bernanke's nomination to a second term.
So far, even with some disappointments in economic data, U.S. stocks have continued to rise, bringing the S&P 500 $SPX up more than 60% from its March lows.
The Dow Jones Industrial Average $INDU, which entered Friday's session at a 13-month high, ended the week down 0.1%, snapping a three-week winning streak. The S&P 500 fell 0.5% and the Nasdaq Composite COMP lost 0.4% for the week. Still, the major indexes have gained well over 4% this month.
"This is the bull market that everyone hates," said Richard Campagna, chief investment officer at 300 North Capital, who helps oversee $5 billion in assets.
"It feels like an inch below the surface there is absolute disbelief and fear, and yet we don't have a correction. We still have people waiting to get in."
Plus other financial indicators, including the options market and Treasury bills, show very bearish sentiment on the outlook for the economy and equities, Campagna said.
Three jobs reports
In the forefront of concern: jobs.
"We're going through a traditionally strong period in the market, from November to January, but with the move so far, we expect gains to be somewhat muted unless we get confirmation from the employment data" that job losses are declining, said Hyrb.
On Friday, the Labor Department is expected to say the U.S. economy lost about 125,000 jobs in November, according to the median estimate of analysts surveyed by MarketWatch. While still negative, it would be an improvement from the 190,000 lost in October.
Economists get a first taste of that report Wednesday, when payroll provider ADP releases its estimate of jobs.
Then on Thursday, investors will watch the weekly jobless claims report for numbers below levels considered to signal a turn in the monthly payrolls number, from negative to positive.
Politics may get into the mix as well, with some Democrats on Capitol Hill pushing for a jobs stimulus package and the White House hosting a jobs summit.
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