Stocks Will Try To Capitalize on Friday’s Post-Thanksgiving Rally Next Week

Nov.25, 2007 in Market Outlook

With investors hopeful that retailers fared better than expected on Black Friday, one of the most important days of the year for store sales.

Expectations for this holiday season have been lowered following drops in consumer-confidence surveys.

“The consumer-confidence readings, they’re just numbers from surveys,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services. “But now we’re finding out what consumer spending is really like, so the weekend numbers will be very important for the market.”

“I think the market is deeply oversold,” said Al Goldman, chief market strategist at A.G. Edwards in St. Louis. “The averages are all down a little over 10% since October [and] gloom is so thick, you can cut it with a knife. This is just the environment that you see at a short-term bottom.”

Hopes of a consumption-driven holiday season may help the market set aside concerns about bad home loans, which have sunk most financial stocks, traditionally the leaders of the broad market.

But worries over a financial and economic downturn have now led investors to firmly expect the Federal Reserve to deliver another quarter-percentage point rate cut when it next meets on Dec. 11.

“If there’s no cut, all hell would break loose. We’d go down really hard in that case,” said Mendelsohn. “But with a cut, we may delay that or avoid it altogether.”

Among key economic indications next week, investors will pay close attention to the Fed’s survey of regional economies on Wednesday.

Also important will be durable-goods orders data for October on Wednesday and a second reading of third-quarter economic growth on Thursday. Friday also will see the November Chicago-area manufacturing survey, as well as personal-income data and construction-spending numbers for October.

http://www.marketwatch.com/news/story/us-stocks-turn-holiday-sales/story.aspx?guid=%7BC31A893E%2D6C0C%2D428F%2DB71E%2D78DC4C4AD9E6%7D

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