Retail sales weak
November retail sales figures came in pretty strong, or so it was reported.
In fact, Goldman Sachs pointed out that major retailers included an extra week in this year's November calculation (this year, Thanksgiving happened on the 22nd, allowing a full week after to be included). Distorting those figures helped but will hurt in December. In effect, they borrowed from December Sales relative to last year. Ooops.
As Goldman said "The corollary of better November data is a headwind for December retail sales reports. If the effect of over two percentage points is symmetric, then December same-store sales stand a good chance of coming in at or below zero."
We are entering a death-by-a-million-cuts as consumers and small stores begin to feel the pain. Folks will start to cut back first on holiday gift giving. Vacations will be more modest. Big ticket item spending wil lget postponed. Then services will get trimmed - those pedicures and manicures become less essential, the termite maintenance can be skipped once in a while, home insurance will be scaled back, and so on.
Now, since folks won't believe anything until they read it, the stocks will not take major hits yet. I would expect guidance to be fuzzy in the next earnings reports.
In fact, Goldman Sachs pointed out that major retailers included an extra week in this year's November calculation (this year, Thanksgiving happened on the 22nd, allowing a full week after to be included). Distorting those figures helped but will hurt in December. In effect, they borrowed from December Sales relative to last year. Ooops.
As Goldman said "The corollary of better November data is a headwind for December retail sales reports. If the effect of over two percentage points is symmetric, then December same-store sales stand a good chance of coming in at or below zero."
We are entering a death-by-a-million-cuts as consumers and small stores begin to feel the pain. Folks will start to cut back first on holiday gift giving. Vacations will be more modest. Big ticket item spending wil lget postponed. Then services will get trimmed - those pedicures and manicures become less essential, the termite maintenance can be skipped once in a while, home insurance will be scaled back, and so on.
Now, since folks won't believe anything until they read it, the stocks will not take major hits yet. I would expect guidance to be fuzzy in the next earnings reports.
posted by Andrew at
5:09 AM
2 Comments:
Thanks for the great summary.
It is interesting to watch how the market react with disappointment against Fed cut of 25 basis point yesterday.
This morning's joint effort by the Fed, Bank of Canada, Bank of England and ECB to address liquidity issues managed to counteract some of the disappointment left in the market after yesterday's 25 basis point cut in the fed funds & discount rates. However, not too long after the open, the broader market given up a good portion of the initial spike after market digested the Fed news.
I am still skeptical whether there is a santa rally this year. At the same time, we have yet to see the lower low against the lowest point in Nov to convince me that the market has turned bearish.
Thanks for your comments.
I think that market forces are already fixing the problem - and it isn't requiring a bail out of the banks. Basically, banks are finally accepting that they have dud loans and they are accounting for them accordingly.
Bouncing off 12,700 was a good thing for technicals, and I expected a brief rally because 14,200 to 12,700 is a big drop in such a short time.
I see the market rising from a combination of a reaction to the over-selling and the December rally. So a return to 13,200 and then a December rally.
But the rally is misleading. I think the DOW is affected by recession-prone stocks. The stocks I want are rallying big time.
January will be very hard for recession-prone stocks. These are companies that depend on consumer debt to survive - retailers and car companies, for example.
January is when the truth comes out, and the market won't react well.
There will be contradictory signals. Look at housing, for example. The NAR is predicting a housing bottom whereas builders like Hovnavian are saying 2008 will be dismal. Personally, I trust Hovnavian because the CEO can be sued if he is caught misleading the public. NAR, however, can plead that it was just mistaken.
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