Market Matters…
* Prices reflect Wednesday’s close (12/23).
Hello…anyone out there? (Who am I kidding?) Automobile association AAA estimated that almost 90 million folks will travel at least 50 miles during the holidays (and many have, most likely, already left). That number represents a 3.8% increase over the same time frame in 2008 when the country (world, for that matter) was in the throes of the worst economic downturn since the Great Depression. While analysts see some signs of stabilization, most predict the rebound will be slow to develop. Still, even though gasoline prices are some 92.5 cents above last year’s levels, travelers seem to be throwing caution to the wind and many made plans to visit family and friends (and even in-laws) this holiday season. Ultimately, the consumer must help lead the country out of the dire times and the increased travel implied a nice step in that direction.
Boardroom confidence also seems to be on the rise as a few year-end announcements indicate that businesses may be expecting bigger and better things for 2010. French pharma Sanofi-Aventis plans to acquire Chattem Inc. (Selsun Blue, Gold Bond) for just under $2 billion, and Bucyrus International made a play for Terex’s mining equipment segment for $1.3 billion. Spyker NV proposed one last ditch offer to buy Saab from GM and resurrect (at least temporarily) the deal by breathing new life into the seemingly soon-to-be defunct automaker. Meanwhile Ford continued its cost-cutting mode by proposing buyout incentives and retirement packages to all 40k+ hourly factory production workers. The gov has proclaimed some positive benefits from the much maligned TARP program; over the past few weeks, treasury has auctioned bank warrants for JP Morgan Chase, Capital One, and TCF Financial with surprisingly strong results as certain investors look to participate in future appreciation (potential) of the financial services sector without paying full-price for the underlying stocks themselves.
Politicos put off their travel plans to finalize a vote on the historic health care plan that will move beyond the Senate without any Republican support (though they vow to continue the “good” fight). House Democrats will most likely be forced to give up on the controversial public option as debate begins in earnest on a compromise version. The non-partisan Congressional Budget Office projects the Senate’s plan will cost $871 billion over the next 10-years, but will trim $132 billion from the federal deficit, while extending coverage to 31 million uninsured people. Expect plenty of new grandstanding and even more confusing number-crunching in the weeks ahead.
The dollar enjoyed a nice rebound as investors believe that the Fed will be hiking rates at some point next year. As has been the trend, gold moved in the opposite direction and even traded below 1,100 an ounce for the first time since early November. Crude continued its range-bound trading and hovered around $75/barrel after a report depicted declining inventories. The treasury yield curve (difference between short- and long-term rates) widened to levels not seen since early summer, another favorable sign of a strengthening economy. As bond prices fell, stocks rose, though volume remained light as traders started their vacations (and quality time with in-laws).
Weekly Economic Calendar
The winter storms that harassed the northeast over the final shopping weekend before Christmas could not have come at a worse time for the nation’s retailers. With consumers forced inside, the International Council of Shopping Centers (ICSC) warned that sales plummeted in what would normally be a hectic week of frenzied last-minute activity. Planalytics, a weather consulting firm, estimated that retailers lost about $2 billion in sales because of the storms.
TGFTI (thank goodness for the Internet). While big-box retailers (actual brick and mortar stores) may have suffered down the homestretch, more consumers have taken to shopping from the comfort of their home (or office) computers. Coremetrics Inc. projected that online sales last Friday and Saturday (December 18th and 19th) soared 24% from last year and Forrester Research expects that e-commerce transactions will represent about seven percent of all sales in 2009 (up from six percent in 2008). Amazon.com and Wal-Mart clearly have benefited the most from this enhanced activity as these mega-stores have the cost-structures in place to take advantage of major discounting (and free shipping), where smaller retailers simply cannot compete. In fact, Wal-Mart said this mass discounting phenomenon will continue through the end of the year (so keep those credit cards handy).
Sticking with the consumer, personal income rose by its best percentage since May 2009 and spending increased in November as well. Among other economic news, housing data was mixed during the week as existing home sales climbed more than expected in November, while new home sales decreased to its lowest level since April. The extension of the tax credit for first-time homeowners probably aided the existing home statistic as most initial buyers do not build new houses. Additionally, previously owned homes include foreclosed properties that are offered at substantially discounted prices and are more affordable to this group of purchasers. The third quarter GDP release was revised downward again from the 3.5% growth rate initially reported to a 2.2% increase now. Still, the economic revival represented the first such expansion since the second quarter of 2008.
On the Horizon…While Christmas generally represents the end of retail activity for the year, the continued discounting wars by Wal-Mart, Amazon.com, and others could lead to a flurry of end-of-the-year activity as consumers load up on those necessities of life (HDTVs, Playstations, etc.) that Santa may have forgotten to include as stocking stuffers this year. While OPEC kept its production levels in tact, expect crude, gold, and other commodities to trade in-line (rather opposite) to the dollar, which is undergoing a newfound favorable transformation as Fed watchers begin debating the likelihood of a future rate hike (though don’t expect one at least until mid-year). Fund managers (at least those in the office) will continue to massage their portfolios over the last few days of trading to take advantage of the run-up in equity prices since March 2009 and establish a plan for further profitability in the new year. But, for now, enjoy the spirit of the season, time spent with friends and family (and in-laws), and be thankful for the progress made since last year this time. Happy holidays.
| Market/Index | Year Close (2008) | Qtr Close (09/30/09) | Previous Week (12/18/09) | Current Week (12/25/09)* | YTD Change |
| Dow Jones Industrial | 8,776.39 | 9,712.28 | 10,328.89 | 10,466.44 | 19.26% |
| NASDAQ | 1,577.03 | 2,122.42 | 2,211.69 | 2,269.64 | 43.92% |
| S&P 500 | 903.25 | 1,057.08 | 1,102.47 | 1,120.31 | 24.03% |
| Russell 2000 | 499.45 | 604.28 | 610.57 | 630.98 | 26.33% |
| Global Dow | 1526.21 | 1,894.59 | 1,934.82 | 1,973.81 | 29.33% |
| Fed Funds | 0.25% | 0.25% | 0.25% | 0.25% | 0 bps |
| 10 yr Treasury (Yield) | 2.24% | 3.31% | 3.55% | 3.75% | 151 bps |
Hello…anyone out there? (Who am I kidding?) Automobile association AAA estimated that almost 90 million folks will travel at least 50 miles during the holidays (and many have, most likely, already left). That number represents a 3.8% increase over the same time frame in 2008 when the country (world, for that matter) was in the throes of the worst economic downturn since the Great Depression. While analysts see some signs of stabilization, most predict the rebound will be slow to develop. Still, even though gasoline prices are some 92.5 cents above last year’s levels, travelers seem to be throwing caution to the wind and many made plans to visit family and friends (and even in-laws) this holiday season. Ultimately, the consumer must help lead the country out of the dire times and the increased travel implied a nice step in that direction.
Boardroom confidence also seems to be on the rise as a few year-end announcements indicate that businesses may be expecting bigger and better things for 2010. French pharma Sanofi-Aventis plans to acquire Chattem Inc. (Selsun Blue, Gold Bond) for just under $2 billion, and Bucyrus International made a play for Terex’s mining equipment segment for $1.3 billion. Spyker NV proposed one last ditch offer to buy Saab from GM and resurrect (at least temporarily) the deal by breathing new life into the seemingly soon-to-be defunct automaker. Meanwhile Ford continued its cost-cutting mode by proposing buyout incentives and retirement packages to all 40k+ hourly factory production workers. The gov has proclaimed some positive benefits from the much maligned TARP program; over the past few weeks, treasury has auctioned bank warrants for JP Morgan Chase, Capital One, and TCF Financial with surprisingly strong results as certain investors look to participate in future appreciation (potential) of the financial services sector without paying full-price for the underlying stocks themselves.
Politicos put off their travel plans to finalize a vote on the historic health care plan that will move beyond the Senate without any Republican support (though they vow to continue the “good” fight). House Democrats will most likely be forced to give up on the controversial public option as debate begins in earnest on a compromise version. The non-partisan Congressional Budget Office projects the Senate’s plan will cost $871 billion over the next 10-years, but will trim $132 billion from the federal deficit, while extending coverage to 31 million uninsured people. Expect plenty of new grandstanding and even more confusing number-crunching in the weeks ahead.
The dollar enjoyed a nice rebound as investors believe that the Fed will be hiking rates at some point next year. As has been the trend, gold moved in the opposite direction and even traded below 1,100 an ounce for the first time since early November. Crude continued its range-bound trading and hovered around $75/barrel after a report depicted declining inventories. The treasury yield curve (difference between short- and long-term rates) widened to levels not seen since early summer, another favorable sign of a strengthening economy. As bond prices fell, stocks rose, though volume remained light as traders started their vacations (and quality time with in-laws).
Weekly Economic Calendar
| Date | Release | Comments |
| December 22 | GDP (3rd qtr - revised) | Downward revision, though still strongest in 2 years |
| Existing Home Sales (11/09) | Better than expected increase in activity | |
| December 23 | Personal Spending/Income (11/09) | Biggest increase in income since May |
| New Home Sales (11/09) | Lowest level since April | |
| December 24 | Initial Jobless Claims (12/19) | |
| Durable Goods Orders (11/09) | ||
| December 25 | Christmas Holiday | Markets closed |
| The Week Ahead | ||
| December 29 | Consumer Confidence (12/09) | |
| December 31 | Initial Jobless Claims (12/26) |
The winter storms that harassed the northeast over the final shopping weekend before Christmas could not have come at a worse time for the nation’s retailers. With consumers forced inside, the International Council of Shopping Centers (ICSC) warned that sales plummeted in what would normally be a hectic week of frenzied last-minute activity. Planalytics, a weather consulting firm, estimated that retailers lost about $2 billion in sales because of the storms.
TGFTI (thank goodness for the Internet). While big-box retailers (actual brick and mortar stores) may have suffered down the homestretch, more consumers have taken to shopping from the comfort of their home (or office) computers. Coremetrics Inc. projected that online sales last Friday and Saturday (December 18th and 19th) soared 24% from last year and Forrester Research expects that e-commerce transactions will represent about seven percent of all sales in 2009 (up from six percent in 2008). Amazon.com and Wal-Mart clearly have benefited the most from this enhanced activity as these mega-stores have the cost-structures in place to take advantage of major discounting (and free shipping), where smaller retailers simply cannot compete. In fact, Wal-Mart said this mass discounting phenomenon will continue through the end of the year (so keep those credit cards handy).
Sticking with the consumer, personal income rose by its best percentage since May 2009 and spending increased in November as well. Among other economic news, housing data was mixed during the week as existing home sales climbed more than expected in November, while new home sales decreased to its lowest level since April. The extension of the tax credit for first-time homeowners probably aided the existing home statistic as most initial buyers do not build new houses. Additionally, previously owned homes include foreclosed properties that are offered at substantially discounted prices and are more affordable to this group of purchasers. The third quarter GDP release was revised downward again from the 3.5% growth rate initially reported to a 2.2% increase now. Still, the economic revival represented the first such expansion since the second quarter of 2008.
On the Horizon…While Christmas generally represents the end of retail activity for the year, the continued discounting wars by Wal-Mart, Amazon.com, and others could lead to a flurry of end-of-the-year activity as consumers load up on those necessities of life (HDTVs, Playstations, etc.) that Santa may have forgotten to include as stocking stuffers this year. While OPEC kept its production levels in tact, expect crude, gold, and other commodities to trade in-line (rather opposite) to the dollar, which is undergoing a newfound favorable transformation as Fed watchers begin debating the likelihood of a future rate hike (though don’t expect one at least until mid-year). Fund managers (at least those in the office) will continue to massage their portfolios over the last few days of trading to take advantage of the run-up in equity prices since March 2009 and establish a plan for further profitability in the new year. But, for now, enjoy the spirit of the season, time spent with friends and family (and in-laws), and be thankful for the progress made since last year this time. Happy holidays.
