Friday, November 25, 2022

Markets edge higher in listless trading

Dow gained 177, advancers over decliners 2-1 & NAZ was off 46.  The MLP index went up 1+ to the 225s & the REIT index crawled up 1+ to the 287s.  Junk bond funds slid lower & Treasuries saw a little selling (more below).  Oil was off pennies in the 77s & gold added 3 to 1749.

AMJ (Alerian MLP index tracking fund)

 

 

 




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Black Friday is traditionally seen as the kickoff for America's Christmas shopping season, but inflation appears to have shifted consumer behavior this year to the point Black Friday will be eclipsed ever so slightly by Small Business Saturday.  A new survey released by Bankrate.com found that 59% of holiday shoppers are likely to hit stores on Small Business Saturday, while 56% plan on making purchases on Black Friday.  Retailers will still see significant traffic both in person & online this Thanksgiving weekend just like usual, with some 80% of shoppers saying they will shop on either Fri, Sat or Cyber Monday.  But trends indicate several months of high prices have prompted consumers to plan ahead for the holidays in 2022.  Ted Rossman, senior industry analyst for Bankrate,said he speculates this will be the most "normal" holiday shopping season in 3 years since most of the pandemic worries have faded.  But he says "inflation is now the dominant theme."  In a previous survey, Bankrate found that 40% of holiday shoppers are changing their habits due to higher prices by seeking more discounts, shopping earlier & buying fewer items.  Rossman pointed out that roughly ½ of shoppers surveyed began making Christmas gift purchases prior to Halloween, which is similar to last year.  But he says this year "the motivation is different."  While the 2021 shopping season was dogged by supply chain woes, those have largely healed. Now, many retailers are burdened with too much inventory that is forcing them to offer more discounts.  "This should be the best discounting season in years," Rossman predicted.  Rossman says the evidence is already there, with several retailers launching Black Friday- & Cyber Monday-type deals in early Oct.  He pointed out that consumers are still spending, but they're being especially thoughtful about where each dollar goes as essentials such as gas, groceries & housing are gobbling up greater shares of household budgets.  Since a lot of people already started shopping early, Rossman explained, this weekend's shopping may not look exactly as it did pre-pandemic.  There may not be as many shoppers lined up at 5 AM for door busters given that a lot of deals have already been available online for weeks.

Black Friday taking a back seat to Small Business Saturday this year

High inflation & fears that a recession could be on its way won't stop holiday shopping from being robust this year, according to a recent forecast by Insider Intelligence & eMarketer.  Inflation could even propel holiday sales.  Consumer spending is projected to grow 7% to nearly $1.3T, the forecast said.  However, it noted that much of this gain is due to inflation.  Cyber Monday & Black Friday online sales could reach nearly $12B & $10B, respectively.  This would mark a 3.8% year-over-year increase in Cyber Monday sales & a 3.9% increase for Black Friday sales.  These shopping holidays are expected to be the largest for e-commerce sales, followed by Thanksgiving, Small Business Saturday & Cyber Sunday.  Although online shopping is ramping up, in-store sales will also "remain strong at 5.9%" & surpass $1T for the first time, the study projects.  "Consumers are comfortable being in stores and have money to spend," Insider Intelligence & eMarketer said in its forecast.  "So they’re out shopping in full force once again. The decline of brick-and-mortar retail has been greatly exaggerated."  Many Americans are still dealing with major debt, even as holiday shopping is expected to increase. 

Holiday shopping expected to reach over $1 trillion as inflation surges

Treasury yields were slightly higher as investors digested the Federal Reserve's Nov meeting minutes, which suggested that interest rate hikes would be slowed in the coming months.  The yield on the benchmark 10-year Treasury note was about 2 basis points higher at 3.726% & the 2-year Treasury yield was last trading at 4.512%, up about 2 basis points.  Yields & prices move in opposite directions & one basis point equals 0.01%.  As markets re-opened for a ½-day of trading, they continued to absorb the Fed’s Nov meeting minutes published earlier in the week.  The minutes suggested that the central bank would soon slow the pace of interest rate hikes.  “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” they said, echoing the tone struck by Fed speakers in recent weeks.  Central bank officials have been indicating that whilst rates will continue to rise, they will likely do so in smaller increments.  This has been welcomed by many investors as concerns about the speed of rate hikes leading the economy into a recession have spread. 

Treasury yields tick higher as markets assess Fed rate policy outlook

Many traders are on holiday already so there is not much going on in the shortened day of trading.  The week has been good to investors with the Dow up 600.  😀

Dow Jones Industrials

 






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