Last week was mixed for Wall Street and the capital markets on a number of fronts. Thanks, or rather no thanks, to Hurricane Sandy, the Northeast faced billions of dollars in damages with New York and New Jersey heavily hit by power outages, gas shortages, fallen trees and damaged houses. That destruction resulted in a shortened number of trading days for the capital markets, given the closure of the New York Stock Exchange and the Nasdaq last Monday and Tuesday (Oct. 29-30).
The combination of tepid earnings reports received last week and, once again, mixed economic data in the form of the October Employment Report and weaker than expected factory orders for October, resulted in mixed returns for the stock market last week. Looking at the three major market indices, the S&P 500 finished the compressed trading week up modestly, while the Dow Jones Industrial Average and the Nasdaq Composite Index both fell slightly. Even the turnout for Apple’s (AAPL) iPad mini launch was mixed with some stores sporting crowds, while others had modest lines.
Friday’s October Employment Report was the last major piece of economic data that we’ll receive ahead of Election Day tomorrow. Even that report from the Bureau of Labor Statistics (BLS) was mixed. According to the BLS, non-farm payrolls grew at a faster pace than anyone forecasted, but the unemployment rate ticked up to 7.9% from 7.8% in September. Below the headlines, the October data showed a dip in hours worked and hourly wages.
While many people look at the falling trend line in the unemployment rate, digging deeper shows some disturbing trends that have been responsible for that “improvement.” Not only have we seen the labor force shrink over the last year, but we’ve seen a pronounced pick up in part-time jobs as Americans struggle to make ends meet. In many cases, it has become increasingly difficult to make ends meet, given the rise in food, fuel and other prices for other essential goods. Those increases have pressured what disposable income Americans have had, forcing them to make tough decisions and reinforcing the idea of The Cash Strapped Consumer, which has been a key aspect of my Rise and Fall of the Middle Class PowerTrend.
Adding to the mixed aspect of October job creation, Challenger Gray’s Job Cuts Report for October showed a 41% increase in announced job cuts compared to September. There also are growing rumors and innuendo surrounding additional job cuts, should the fiscal cliff materialize and the sequestration result in automatic defense and spending cuts. I think I can safely say that most investors and traders all would like to see stronger job creation, alongside improving wages and disposable income.
In addition to the fiscal cliff, a number of uncertainties affecting companies, investors and consumers have been bandied about the last few months. Well, this week we should start to see a greater sense of certainty and the driver for that will be the outcome of the 2012 Presidential Election. Like it or not, good or bad depending on your politics, one way or another we will soon find out which candidate will be the next President of the United States. Given how close the race is trending, I suspect that rather than risking getting whipsawed many traders will be sitting on the sidelines until after the election’s results are known. Based on those results, we’ll start to get a clearer picture on those other uncertainties — the fiscal cliff, Obamacare stays or not, tax reform and so on — that have been an overhang for the market, investors and companies.
While it has not been talked about much, one of my concerns is that we actually don’t know who the president will be for at least a few days after Election Day. That’s right. This year could be a replay of the 2000 presidential election between George W. Bush and Al Gore. Recall that many Americans woke up to discover that the 2000 presidential election wasn’t over and it would not be over until Dec. 12. During that six-week period that saw the election battle continue in headlines, the S&P 500 fell 4.3%.
No matter who wins the election, the reality is that the country has a lack of confidence in the political system and its ability to navigate the coming fiscal cliff. As we inch closer to that line in the sand, and companies begin to scale back forecasts and announce potential job cuts, the stock market will move as it usually does in the face of uncertainty — down.
While the election will take center stage this week, corporate earnings continue even though they likely will be lost in the election hoopla. While there still are some key technology companies that we’ll hear from this week, including Qualcomm (QCOM), we’ll also start to see a shift toward retail companies like Macy’s (M), Nordstrom (JWN) and Kohl’s (KSS). With only 50 days left until Christmas, the outlooks offered by those companies will be critical in sizing up the health of the year-end holiday spending.
Finally, I have good news to offer you during what has been a challenging week. With just days to go until the U.S. presidential election, your investments and personal wealth depend greatly on who wins. That’s why my colleagues and I have prepared a special investment report for you, absolutely FREE of charge. It’s called “Eagle’s 2012 Election Guide: 4 Winning Picks for the Next President.” You’ll learn of four investment recommendations for a Mitt Romney win and four plays for a second Obama term. I invite you to sign up to receive the free special report. But that’s not all we’re offering you. The day after the election, on Wednesday, November 7, 2012, at 2:00 p.m. Eastern Standard Time, join me for a FREE online Post-Election Investing Summit.
Sincerely,
Chris Versace
Editor, PowerTrend Brief
Here’s a more in-depth look at what investors should be watching and listening to during the next five trading days:
Monday, Nov. 5
ISM Services Index (October)
American States Water (AWR)
DSP Group (DSPG)
HSBC Holdings plc (HBC)
Kona Grill Inc. (KONA)
LeapFrog Enterprises (LF)
Live Nation Inc. (LYV)
Medifast Inc. (MED)
Manitowoc (MTW)
Semiconductor Manufacturing International (SMI)
Tesco Corp. (TESO)
Tesla Motors (TSLA)
Warnaco Group (WRC)
Weight Watchers (WTW)
Zillow, Inc. (Z)
Tuesday, Nov. 6
Election Day
AOL Inc. (AOL)
Cinemark Holdings (CNK)
CVS/Caremark Corp. (CVS)
Amdocs Ltd. (DOX)
Emerson Electric (EMR)
Express Scripts (ESRX)
Fossil, Inc. (FOSL)
Cedar Fair (FUN)
International Flavors & Fragrances (IFF)
Intercontinental Hotels Group (IHG)
News Corp. (NWS)
NYSE Group Inc. (NYX)
Rackspace Hosting (RAX)
TreeHouse Foods (THS)
Vitamin Shoppe (VSI)
zipRealty (ZIPR)
Wednesday, Nov. 7
MBA Mortgage Index (Weekly)
Consumer Credit (September)
Agrium Inc. (AGU)
CBS Corp. (CBS)
CenturyTel Inc. (CTL)
Global Cash Access Holdings (GCA)
I.D. Systems (IDSY)
James River Coal Company (JRCC)
Leap Wireless (LEAP)
Macy’s Inc. (M)
Maidenform Brands (MFB)
Monster Worldwide (MNST)
Novatel Wireless (NVTL)
Universal Display (PANL)
Qualcomm Inc. (QCOM)
Rosetta Stone (RST)
SodaStream International (SODA)
Molson Coors Brewing (TAP)
Time Warner (TW)
Whole Foods Market (WFM)
Thursday, Nov. 8
Initial & Continuing Jobless Claims (Weekly)
American Water Works (AWK)
Bloomin’ Brands (BLMN)
Caribou Coffee (CBOU)
Cobra Electronics (COBR)
Dean Foods (DF)
The Walt Disney Company (DIS)
Dolby Laboratories (DL)
Flowers Foods (FLO)
Flotek Industries (FTK)
Groupon Inc, (GRPN)
GTX Inc. (GTXI)
Inter Parfums Inc. (IPAR)
Jones Soda (JSDA)
Nordstrom Inc. (JWN)
Kohl’s Corp. (KSS)
Kayak Software Corp. (KYAK)
Measurement Specialties (MEAS)
NVIDIA Corp. (NVDA)
Rofin-Sinar Technologies (RSTI)
Senomyx Inc. (SNMX)
Spreadtrum Communications (SPRD)
Tim Hortons Inc. (THI)
Vulcan Materials (VMC)
Wendy’s International (WEN)
Friday, Nov. 9
Michigan Sentiment Index (November)
Foster Wheeler (FWLT)
J.C. Penney Company (JCP)
Lions Gate Entertainment (LGF)
K12, Inc. (LRN)
NutriSystem, Inc. (NTRI)
Strayer Education (STRA)
