PowerTrend Brief: Digesting More Than Turkey as Holiday Spending 2012 Begins

Last week was a short one for the stock market as the domestic markets were closed last Thursday and opened Friday with shortened hours. Even so, all of the major market indices were up nicely last week. That gain continued the market rebound that began on Nov. 16 and now has the Dow Jones Industrial Average up 6.5% year to date, and both the S&P 500 and the Nasdaq Composite Index up a more impressive 12% and 13.9%, respectively, on the same basis. The shortened trading week was due to the Thanksgiving holiday, which happens to be my favorite one. There was no meaningful movement on “fiscal-cliff” discussions last week, and that lack of news meant investors focused more on fundamentals than political maybes.

Those fundamentals showed the housing recovery continued in October as new housing starts and existing home sales rose month over month. The underlying data in the existing home sales report showed a continued drop in the months’ supply of homes and a steady increase in the median price bodes well for new housing construction. For the last few months, as the industry data has firmed, I have shifted my view on the housing market from skeptical to hopeful and subscribers to ETF PowerTrader are reaping the benefits, given the nice move in our housing ETF selection but also the near 40% jump up in my call option recommendation. We’ll get more housing data this week with the Case-Shiller 20 City Index reading for September, which should be released on Tuesday, and for October New Home Sales, which should be available on Wednesday. Both reports should continue to favor our housing plays.

That said, the real long-term driver of housing demand is job creation. While there is reason to think there is more to go in the housing recovery, a long-term boom is not likely until job creation accelerates from tepid levels. That’s a natural segue with which to mention last week’s initial jobless claims, which were released a day early, given the Thanksgiving holiday. While the weekly data dipped after the prior week’s sharp jump, it remained well above the 400,000 level.

To me, that situation confirms that last week’s rise was due to factors other than just the fallout from Hurricane Sandy. Those other factors include a growing number of companies announcing headcount reductions and layoffs as we get closer and closer to the “fiscal cliff.” Many an ear tuned into the news of Hostess Brands shuttering its doors and laying off 18,000 workers, and that prompted many people to high tail it to stores in search of the last few remaining boxes of Twinkies, Ding Dongs, Ho Ho’s, Wonder Bread and more. While that last-ditch effort was under way, more layoff announcements were made by Citigroup, Cliff Natural Resources, Kaiser Permanente, medical giant Stryker, and a number of municipalities and townships.

Last week also marked the kick off to the 2012 holiday shopping season with Black Friday and tomorrow’s Cyber Monday. Early reports are mixed. ShopperTrak, which measures and analyzes foot traffic at more than 50,000 retail locations nationwide, reported Black Friday store visits climbed 3.5% from last year to more than 307.67 million, but Black Friday retail sales fell 1.8% to $11.2 billion.

Blurring the line between in-store price comparison shopping and stay at home shopping via the Internet, IBM reported the number of consumers using their mobile device to make a purchase on Black Friday this year increased by nearly two-thirds from 2011. According to IBM, Apple’s (AAPL) iPad made up nearly 10% of online shopping traffic on Black Friday this year, while the iPhone brought in almost 9% and Google (GOOG) powered Android devices accounted for 5.5%. That’s a confirming point behind my Always On, Always Connected PowerTrend that is one of the cornerstones of my PowerTrend Profits investment newsletter.

With a little more than 25 shopping days left until Christmas, investors and consumers will be watching retailer sales and other promotional activity in the coming weeks. Investors will be looking to see who is winning dollar share and compromising profitability the least. By comparison, despite all the hoop-la over Black Friday weekend sales, the average consumer has seen his or her disposable income shrink and was out filling their shopping carts with items for themselves as they hit the stores this holiday season, according to the National Retail Federation. This situation to me is a signal that consumers are looking to stretch what dollars they have.

Even though the number of companies reporting their quarterly results has tapered off, this week we’ll get a host of retailer results. From a timing perspective, these companies are likely to be a litmus test of sorts for the Black Friday-Cyber Monday shopping weekend. From Ulta Salon (ULTA) to Ann Taylor (ANN) to Tiffany (TIF) and Five Below, we’ll get the latest on retail from the low end to the high end. Also this week, we’ll get the latest snap shot on manufacturing activity via the October Durable Orders report and the Fed’s Beige Book for the same month. We’ll also get an idea as to how consumers are viewing the “fiscal cliff” when we get the personal income and spending data for October. Lastly, as things get back to normal in Washington, look for more on the “fiscal cliff.”

Sincerely,

Chris Versace
Editor, PowerTrend Brief

Here’s a more granular look at what investors should be watching and listening to during the next five trading days, as well as a list of companies slated to share their latest quarterly results:

Tuesday, Nov. 27
Durable Orders (October)
Case Shiller – 20 City Index (September)
Consumer Confidence (November)
FHFA Housing Price Index (September)
Analog Devices (ADI)
ADT Corp. (ADT)
Green Mountain Coffee (GMCR)
Ralcorp Holdings (RAH)

Wednesday, Nov. 28
MBA Mortgage Index (Weekly)
New Home Sales (October)
Fed’s Beige Book (October)
American Eagle Outfitters (AEO)
Ann Taylor Stores (ANN)
Coldwater Creek (CWTR)
Express, Inc. (EXPR)
Guess? Inc. (GES)
SemiLEDs Corp. (LEDS)
Movado Group (NOV)
New York & Co. (NWY)
rue21 Inc. (RUE)
TiVo Inc. (TIVO)

Thursday, Nov. 29
Initial & Continuing Jobless Claims (Weekly)
GDP – Second Estimate (3Q 2012)
Pending Home Sales (October)
Aeropostale Inc. (ARO)
Avago Technologies (AVGO)
Barnes & Noble (BKS)
Five Below, Inc. (FIVE)
Kroger co. (KR)
La-Z-Boy Inc. (LZB)
OmniVision Technologies (OVTI)
Pall Corp. (PLL)
Pacific Sunwear of California (PSUN)
Royal Bank of Canada (RY)
Tiffany & Co. (TIF)
Ulta Salon, Cosmetics & Fragrance Inc. (ULTA)
Zumiez Inc. (ZUMZ)

Friday, Nov. 30
Personal Income & Spending (October)
Chicago PMI (November)
Genesco Inc. (GCO)
Johnson Outdoors (JOUT)
United Natural Foods (UNFI)