Monday, November 30, 2015
Stocks are on track to open modestly in the green on this last day of November, the second month in a row of positive returns for the major indexes. A lot of today’s focus will be on spending trends over the holiday weekend, particularly the online vs. offline debate, but this is a very busy week on the data calendar, with a number of top-tier economic readings on deck.
The highlight of this week’s economic calendar is the November jobs report coming out on Friday, with consensus expectations of 190K payroll adds for the month, which would follow October’s blockbuster 271K read. There is no shortage of economic reports this week, including two speeches from the Fed Chairwoman, but the jobs report is the last major economic reading with Fed implications.
The consensus view is that the start of the Fed’s tightening cycle is effectively guaranteed at the mid-December FOMC meeting unless the jobs report comes up short of estimates. That is true, but the hurdle rate is likely is very low for the Fed to stand back from raising rates on account of the jobs report; we likely need a sub-100K reading on Friday to dissuade the Fed from going for lift-off.
A day before this week’s key U.S. jobs report, the European Central Bank (ECB) is expected to add to its existing monetary stimulus program. This ECB expectation is a big reason for improving momentum in European stocks despite the tough geopolitical backdrop. This divergence between the Fed and the ECB has been the primary driver pushing the U.S. dollar and the common currency towards parity, with many expecting the dollar’s strengthening trend to continue in 2016. The strong dollar emerged as a major headwind for corporate profitability in the last two earnings seasons and the issue isn’t going away anytime soon.
Beyond “central bank-watch,” we will be hearing today about a number of surveys trying to take stock of spending trends over the Thanksgiving holiday. Not to steal any specific survey’s thunder, but the reality is that a lot of us are shopping online now; making comparisons of mall foot traffic no longer as important as in the days past.
Amazon (AMZN) is a big winner in the online space, but they are hardly alone, with pretty much all the retail players having a growing online presence. Overall trends in consumer spending appear OK — not great, but not bad either. Keep this fact in mind as you digest headlines about Black Friday or Cyber Monday today and in the coming days.
Sheraz Mian
Director of Research
Note: In addition to this daily pre-open article about the market, economy, and the corporate earnings picture, Sheraz Mian also provides detailed earnings analysis in his weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz Mian publishes a new article, please click here.
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