In Between Days

by CC January 3, 2012 1:18 am • Commentary


Congratulations, America, your stock market just ended the year almost precisely unchanged.

In what appears to be the smallest annual market move for the S&P 500 since 1950, and possibly in the history of everything, the S&P 500 has ended the year at 1257.60, which is just 4 ticks below the 1257.64 it ended 2010.

That is a decline of 0.003% for the year.


When top retailers post their December sales this week, Wall Street analysts are expecting them to report a healthy end to the holiday season, helped by discounts, improved consumer sentiment and tactics like extended hours and layaways.

Some 22 major chains, from Macy’s Inc and Target Corp to Costco Wholesale Corp and Gap Inc should post an aggregate 4.3 percent increase in December sales at stores open at least a year, according to Thomson Reuters, capping a season that started moderately but gained steam in December.

The top gainers are again expected to be discount chains like Costco, with its cheaper gasoline, and Target as shoppers sought out low prices.

Higher up the price spectrum, chains like Saks Inc, Nordstrom Inc and Macy’s Inc should also do well, helped by the continued recovery of high end spending and a stock market that rebounded after swooning earlier in the fall.

But chains like J.C. Penney Co Inc and Gap, which are under pressure to slash prices to lure price conscious shoppers, are expected to be laggards again after seeing sales declines in November.

Penney sales should be flat, while Gap’s are expected to slip 0.5 percent, hurt by a 3 percent drop at its low-price Old Navy chain, according to Thomson Reuters data.


China’s big manufacturers narrowly avoided a contraction in December a survey showed on Sunday, but downward risks persist and suggest the world’s second’s second-largest economy will need fresh policy support to counter a slowdown in growth.

The official purchasing managers’ index (PMI), complied by the China Federation of Logistics and Purchasing (CFLP) on behalf of the National Bureau of Statistics, rose to 50.3 in December from 49 in November.

That indicated a slight expansion in business activity in China’s vast factory sector, but the reading was barely above the flatline of 50 that demarcates expansion from contraction which the index fell below in November for the first time since early 2009.

Analysts had expected the official PMI to be at 49.1 in December.

Calculated Risk

It is very disturbing when a key policymaker like German Finance Minister Wolfgang Schaeuble says “This is not a euro crisis, it is a debt crisis in some euro states”. Not only is that incorrect, but it is a reminder that the current policy is all stick and no carrot. Where is the growth agenda? The current path of endless austerity, slow wage deflation, and high unemployment in several countries seems politically unsustainable. Much of Europe is probably already in recession, and it could get much worse.

It seems only a serious event, what many analysts are calling a “Lehman moment”, will shock policymakers into more effective action. But maybe that is too pessimistic. There has been some discussion of a “roadmap” for the issuance of eurobonds (this will probably be discussed on January 9th). And apparently a growth agenda will be discussed at the next summit meeting on January 30th. That sounds like small carrots. A little more inflation would help with adjustments too, but no policymaker will say that openly.

A key short term issue is the haircuts for private creditors of Greek debt. This is expected to be resolved very soon. No agreement probably means default, and possibly an exit from the euro. So I expect an agreement to be reached at the last minute.

And all year there will be significant bond auctions for Italy, Spain, Belgium and France. More market stress is guaranteed.

This Week’s Tape- WSJ


ISM Manufacturing for December

Construction Spending for November

FOMC Minutes

Iowa GOP Caucus




ADP Employment Report for December

Weekly Jobless Claims

ISM Non-Manufacturing Index for December


Jobs Report for December









Constellation Brands

Family Dollar Stores

Apollo Group