Leave it to a nice Jewish girl from Brooklyn to give Santa Claus a nudge. In its last policy meeting of the year, Janet Yellen (who hails from Bay Ridge, Brooklyn) and her cohorts at the Fed split the difference on the language used to describe when we would see an increase short-term interest rates. The central bank “judges that it can be patient (emphasis mine) in beginning to normalize the stance of monetary policy,” but also added the new description of their stance was “consistent” with past assurances that rates would stay low for a “considerable time.” Investors loved the punt, believing that the Fed is not likely to raise rates any time soon. All of the sudden, the Santa Claus Rally was ON! In fact, after a dismal start to the week, stocks powered higher Wednesday through Friday (the best three-day percentage gain for the Dow and the S&P 500 in three years) and finished within striking distance of all-time highs. Fears melted away about the oil plunge signifying a global growth slowdown and a possible financial contagion from the Russian currency crisis, allowing ol’ Saint Nick (via Saint Janet) to take control.
Meanwhile, consumers and retailers are preparing for the last gasp of holiday shopping before Christmas. Early results have been mixed, but that might have more to do with the season stretching out over a longer period, than the fact that people are spending less overall. Separate data from IBM’s real-time tracking index of digital shopping and Adobe confirm that consumers have already spent record amounts online and companies like Wal-Mart and Target reported strong holiday numbers.
These results fly in the face of the National Retail Federation’s finding that total projected sales tumbled 11 percent during the Thanksgiving holiday weekend, but it’s important to note that NRF data is based on a totally non-scientific survey, which asks random shoppers whether they plan to spend more or less than last holiday season. Considering that most consumers can hardly recall what they spent last week - let alone last year, most analysts have dismissed NRF findings.
To determine whether or not Santa delivered retailers a jolly holiday season, we’ll have to wait until the Commerce Department releases its monthly retail sales report in January and retailers report their earnings reports for the fourth quarter. Until then, it’s probably best to concentrate on the holidays themselves and not get wrapped up in guesswork.
MARKETS: Last week was a great lesson in volatility…and if you can’t take it, then you might want to consider reviewing your portfolio allocation. For the five days, Santa stuffed investors’ stockings with gifts, not lumps of coal, as indexes climbed within spitting distance of milestones (Dow 18K) and records (S&P 500 2075).
- DJIA: 17,804, up 3% on week, up 7.4% YTD
- S&P 500: 2070, up 3.4% on week, up 12% YTD
- NASDAQ: 4765, up 2.4% on week, up 14.1% YTD
- Russell 2000: 1196, up 3.8% on week, up 2.8% YTD
- 10-Year Treasury yield: 2.18% (from 2.08% a week ago)
- January Crude Oil: $56.52, down 2.2% on week
- February Gold: $1,196, down 2.1% on week
- AAA Nat'l average price for gallon of regular Gas: $2.43 (from $3.22 a year ago)
THE WEEK AHEAD: By Tuesday at 10:15ET, you can call it quits for the week!
8:30 Chicago Fed Nat’l Activity
10:00 Existing Home Sales
8:30 Durable Goods Orders
8:30 Q3 GDP (final reading, previous=3.9%)
8:30 Personal Income and Spending
10:00 New Home Sales
1:00 US Markets close early for Christmas
Thurs 12/25: CHRISTMAS DAY – MOST GLOBAL MARKETS CLOSED