Retail sales tomorrow (for October) will tell us how strong the holiday shopping season will be

Looking for a mover in a market that seems to have gone to sleep? (Volume on the New York Stock Exchange as of 2:20 p.m. New York time is just 378 million shares. Average volume over the last 10 days has been 902 million.)

How about the October retail sales that get announced tomorrow, Tuesday, November 15, before the New York market opens?

The big pop in September retail sales—up 1.1% from August—was a major factor contributing to optimism about U.S. economic growth. Not only have the projected odds of a U.S. double-dip recession in the next 12 months dropped back to 25% in the November Wall Street Journal poll of 52 private sector economists from 33% in the September survey. But also there’s a growing suspicion that U.S. economic growth in the fourth quarter will hold above 2%. The Blue Chip Economic Indicators poll of economists, for example, most recently projected 2.3% growth.

That would be down from the 2.5% growth in the third quarter, but way above the 1.3% in the second quarter and certainly nothing like the double-dip recession so feared in August and September.

The likelihood is that tomorrow’s retail sales numbers won’t be as strong as September—which got a boost from back to school shopping—but should still show solid growth heading into the holiday shopping season Read more

Buy CVS Caremark (CVS)

So where’s the ‘Mo’?

Remember back on October 27 when stocks looked like they might rally through the end of the year? I asked then whether it was time to go with the momentum or move to the sidelines and wait for a pull back.

Today, just two weeks later, the question seems downright silly. Not only have we had that pullback but also it’s hard to find any momentum in this market at all. (Or at least any momentum to the upside.) I think there’s still a good chance for an end of the year bounce—if only because the world isn’t coming to an end, even in Italy, and the markets were pricing that in on Wednesday, November 9.

But momentum? You know where investors buy stocks that have moved up strongly because they think those shares will move up even more as other investors go chasing past gains? It’s just about impossible to find.

(I’d argue that in a bounce, on the other hand, it’s the stuff that has sold off most strongly that tacks on the gains.)

Almost impossible but not quite. There are a few pockets of momentum in even this current market, but they’re just not in the places that we usually look. I don’t see momentum in technology stocks, for example. In fact, recently the technology-heavy NASDAQ has lagged both the Dow Industrials and the Standard & Poor’s 500. (Yesterday afternoon, for example, as of 3:10 p.m. New York time the S&P 500 was up 0.61% and the NASDAQ Composite was down 0.07%.) Certainly not in financials. Commodities and raw materials stocks aren’t going anywhere as long as the dollar looks so much more attractive than the euro.

But how about names such as Wal-Mart (WMT), Eli Lilly (LLY) and CVS Caremark (CVS)?

In spite of all the scary news out of the EuroZone, these stocks have been moving up and look like they ready to break through resistance and party.

Check, let me rephrase that. Because of all the scary news out of the EuroZone, these stocks have been moving up. Safety with growth and/or a solid dividend yield is back in fashion in the market.

You may have your favorites among this group. At the moment mine is CVS Caremark. Read more

It’s consumer discretionary stocks leading the U.S. market today. (Consumer discretionary spending is spending that consumers don’t have to do, but that they want to do when they have the dough.)

The Standard & Poor’s 500 Stock Index is up 2.06% as of noon New York time today. The S&P consumer discretionary index, on the other hand, as tracked by the Consumer Discretionary Select Sector SPDR ETF (XLY) is up 2.45%.

Not surprising since we’ve got a prefect storm of good news from the consumer sector today:

1. Walt Disney (DIS) beat Wall Street earnings estimates by 6 cents a share when it reported after the market close last night. Revenue came in at $10.43 billion for the quarter, above the $10.35 billion projected by analysts. Revenue at the parks and resorts unit grew by 11%. The shares are up 6.8$ today.
2. The University of Michigan Consumer Sentiment index rose to 64.2 in November from 60.9 in October. Economists had expected an increase to 61.3. This is the strongest reading for the index since June.
3. Based on early reads from companies such as UPS (UPS), retail sales during the holiday shopping season that begins on the Friday after Thanksgiving look like they’re headed toward the high end of projections for 2% to 6% year to year growth.

Stocks doing especially well today include (besides Walt Disney) Amazon.com (AMZN), Coach (COH), Deckers Outdoor (DECK), Ralph Lauren (RL) and VF (VF).

Global stock markets wait on tomorrow’s economic numbers from China and United States for direction

Fasten your seat belts; it could be a bumpy ride tomorrow.

Two economic numbers, one from China overnight (from a U.S. perspective) and one from the United States before the New York market opens, have the power to move stocks in the current very volatile environment.

The Chinese number is the official version of the preliminary manufacturing purchasing managers index (PMI). The preliminary version, released by HSBC and Markit Economics on September 22, showed the manufacturing PMI falling to 49.4 in September from a reading of 49.9 in August. Any index level below 50 indicates that the sector is contracting.

The Shanghai Composite Index fell 2.8% on September 22 and has been dropping since. As of September 29, the index was down 5.9% from September 22.

The fear is that the drop in the manufacturing PMI signals that China’s economy is slowing more than expected and that projections for 8.2% to 8.5% GDP growth in 2012 are still too high and will have to come down, bringing company earnings and stock prices with them.

But the September 22 preliminary reading on the PMI only includes data from about 85% to 90% of China’s companies in the fuller survey that will be released tonight. That extra 10% to 15% might not seem like a big deal but the missing surveys tend to come from China’s biggest state-owned companies. And not only are these companies major exporters but also since they have ready access to financing from the country’s state-owned banks, they haven’t been hit as hard as the smaller companies in the survey by the lending slowdown engineered by the People’s Bank. Anecdotes and data from China say that smaller companies are starved of capital right now.

The market hope is that the full number from the PMI will hang above 50. Read more

This week has started off as last week ended—with investors willing to see the economic glass as half full.

Last Friday U.S. stocks rallied, after initially sinking, after Federal Reserve chairman Ben Bernanke said the U.S. economy is strong enough that the Fed doesn’t need to launch a third round of quantitative easing now. Investors apparently decided it was good news if the Fed thought it didn’t have to intervene to prop up growth.

The Dow Jones Industrial Average climbed 4.3% for the week.

Today U.S. stocks were higher again on an 0.8% increase in personal spending in July. The advance in July was the strongest gain n spending since February and a huge swing from the 0.1% drop in June. Economists surveyed by Briefing.com had expected a 0.5% increase in consumer spending.

In its current glass-is-half-full mode the financial markets were willing to look past the problems represented by a 0.3% increase in personal income in July. Read more