US investors are keeping their fingers crossed that the legendary American consumer has not lost his or her appetite for spending ahead of the crucial pre-Christmas shopping season. Analysts say the approaching week will be of particular importance because the Thanksgiving holiday week traditionally kicks off an annual shopping fest.
Concerns about the health of the American consumer are mounting, however, because of a nagging housing slump, a related credit crunch and surging energy costs.
Whether the nation's malls bulge with shoppers or struggle to get consumers in the door will have repercussions for Wall Street, which has been buffeted by the housing and credit woes. The Dow Jones Industrial Average stock barometer gained 1.0 percent in the week to Friday to close at 13.176.79.
The broad market Standard & Poor's 500 rose 0.3 percent to 1,458.74 while the tech-rich Nasdaq increased 0.3 percent to 2,637.24. With the housing and credit markets on the ropes and rocketing crude oil prices making gasoline more costly at the pump, analysts say consumer spending has become even more vital than usual to US economic well-being.
"Next week is the big week for the consumer. The market is going to pay a lot of attention to it," said Marc Pado, an equities analyst at Cantor Fitzgerald. Pado said the stock markets could rise or fall in coming weeks depending on sales reports from big retailers.
US retail sales, which account for around 70 percent of overall economic growth, showed a lackluster gain of 0.2 percent in October, according to a government report Wednesday. The reading was the weakest since August when sales rose a tepid 0.1 percent.
Economists said they will also be awaiting the release of a consumer sentiment survey next week, published by the University of Michigan, which will reveal clues on whether Americans are maintaining or cutting back their spending.
"The decline in (consumer) sentiment, if sustained, suggests a weak holiday shopping season and is consistent with our view of weaker consumption in the near term," economists at Lehman Brothers said in a briefing note. The release of minutes from the Federal Reserve's last interest rate policy meeting on October 30-31, and reports on leading economic indicators and the housing market are also on Wall Street's radar for the week ahead. The central bank cut borrowing costs for the second straight month in October, by a quarter of a percentage point to 4.50 percent. Economists generally expect the Fed to hold its fed funds short-term interest rate steady at a policy meeting scheduled for December 11.
The leading indicators, Fed minutes and consumer sentiment survey will be released on Monday, Tuesday and Wednesday respectively in an otherwise light week for major economic releases.
Bond prices strengthened in the past week as the yield on the 10-year Treasury bond tumbled to 4.150 percent from 4.225 percent a week earlier, and that on the 30-year Treasury fell to 4.523 percent from 4.602 percent. Bond prices and yields move in opposite directions.
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