November 18, 2018 / 12:04 PM / 2 years ago

Wall St Week Ahead-Investors eye holiday sales for market salve

 (Repeats story from Friday with no change to text)
    By Chuck Mikolajczak
    NEW YORK, Nov 16 (Reuters) - Investors will get a glimpse of
consumer health next week as the holiday shopping season gets
under way with Black Friday sales, and a solid start could help
equities steady after several tumultuous weeks. 
    The day after Thanksgiving has been regarded as the
traditional start of the holiday buying season, although deals
and bargains are being unveiled earlier this year.
    Wall Street has been struggling with uncertainty over U.S.
congressional midterm elections, the path of interest rate hikes
by the Federal Reserve, tariffs, the trade war and the
possibility corporate earnings have already peaked. But a strong
start to the gift buying season could help ease some concerns.
    After an October that saw the S&P 500 slump nearly 7
percent, Wall Street has struggled to find its footing, rising 
0.7 percent so far in November. That puts the index on pace for
its biggest quarterly loss since the third quarter of 2015 and
its worst fourth quarter performance in a decade. 
    About 38 percent of American consumers plan to shop on Black
Friday this year, and six in 10 of those shoppers anticipate
making at least half of their holiday purchases on that day, a
Reuters/Ipsos poll showed on Thursday. 
    "Of all the other factors, the consumer has been hanging in
there - they drove third quarter growth, we are seeing wage
growth over 3 percent, financing rates are still reasonable,"
said Jack Ablin, chief investment officer at Cresset Wealth
Advisors in Chicago. 
    "If we see any kind of disappointment in Black Friday sales,
that is going to cause some real concern."
    Same store sales for the fourth quarter are expected to come
in at a healthy 3 percent, according to Refinitiv data. Still,
that number is trending downward from the previous two quarters
and is slightly below the year-ago result of 3.1 percent. 
    A strong start to holiday sales might not translate to
strong earnings, however, reinforcing concerns about the best of
corporate profits being in the rear-view mirror as retailers
have to grapple with deal-conscious consumers.  
    "Even a healthy consumer doesn't necessarily mean that
retail sales and profitability and performance will be off the
charts," said Shawn Kravetz, president of Esplanade Capital in
Boston, who spoke at the Reuters Global Investment 2019 Outlook
Summit in New York this week.
    Muddying the picture was data on Thursday that showed U.S.
retail sales rebounded sharply in October, boosted by purchases
of motor vehicles and building materials, but the prior two
months were revised lower and the trend indicated slower
consumer spending, which accounts for more than two-thirds of
economic activity in the country.
    Big name retailers such as Target, Lowe's Companies
 and Gap Inc are expected to report quarterly
results next week and investors will watch for any guidance for
the holiday season. 
    Still, a strong start to the holiday shopping season will
only partially alleviate investor concerns, with a G20 meeting
at the end of November and the final Fed policy announcement of
the year in December likely to cause some market volatility.
     The market will need to digest these events for it to have
a chance for what is known as a Santa Claus rally. Since 1950,
the S&P has rallied in December three-fourths of the time,
according to the Stock Traders Almanac. The benchmark index has
gained an average of 1.6 percent for December, the best month of
the year.
    "These are all important things but if the mosaic is either
constructive or negative then that is going to provide a wealth
of information to either drive the market higher or drive the
market lower." said Phil Orlando, chief equity market
strategist, at Federated Investors, in New York.    

 (Additional reporting by Caroline Valetkevitch
Editing by Phil Berlowitz)
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