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A Holiday Shopping Boost for Retail Sales?

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Strong monthly auto sales and the early weeks of holiday shopping should give a boost to November's retail sales.

Economists expect a 0.5 percent gain, when the November number is reported at 8:30 a.m. ET Thursday, following October's 0.3 percent decline.

Car makers had their best month in almost five years, in part because of Super Storm Sandy, which had delayed purchases in late October and then spurred buying in November as consumers replaced storm-damaged vehicles.

"We have a bounce back in retail sales because of autos. Up 0.5 percent is our estimate," said Credit Suisse economist Jonathan Basile. "It's bounced back after Sandy, and that's a welcome development."

He expects the decline in energy costs to have helped spending, particularly at the end of the month. Autos sales reflected an annualized selling rate of 15.5 million in November.

Basile also expects to see weekly jobless claims steady at 370,000, the same level as last week, and well off the highs reached in the weeks after Sandy. There is also PPI data at 8:30 a.m. and business inventories at 10 a.m.

Besides data, traders are watching the $13 billion 30-year bond auction at 1 p.m. The 30-year was yielding 2.89 percent late Wednesday, with prices falling sharply after the Fed announced a new bond buying program that shifts more of the purchases toward the 5-year sector. The 10-year was at 1.70 percent, well above the morning's auction level of 1.652 percent for $21 billion in reopened 10-year notes. Yields move opposite prices.

"I think a lot of it has to do with a good steepening of the curve today. I think it has to do with the fact that a lot of their buying is moved to the 4- to 6-year part of the curve," said Rick Klingman of BNP Paribas. "Everything in Operation Twist was longer duration than six years."

The Fed's Operation Twist program ends at the end of the month, and as expected, the Fed announced on Wednesday it would continue purchasing $45 billion in Treasury securities per month, but will no longer sell an equal amount of shorter duration Treasurys.

Klingman said the Fed surprised the market by announcing that 23 percent of its purchases will now be further down the curve. For the first time, it also said it would keep interest rates low until unemployment falls below 6.5 percent and inflation tops 2.5 percent.

"They gave you a guide post but not a trigger point," he said.

Stocks gyrated Wednesday before closing mixed. The Dow was off 2 at 13,245 and the S&P 500 was up less than a point at 1428.

"I think the market is going to take this in stride, but I still think there's a longer term implication here and this acts as a floatation device for the market. I don't know that today was super newsworthy," said Steve Massocca of Wedbush Securities.

The markets are more focused on what's happening with the "fiscal cliff," taxes, and especially the capital gains and dividend tax rates which expire at the end of the year, he said. The fiscal cliff is the expiration of tax breaks at year end, combined with the onset of automatic spending cuts in January, if Congress does not act.

"I think the market is probably okay," said Massocca. "I don't think it's going to be a big barn burner. I don't think it's going to be a big decline. I think it's going to work its way a little higher. Do we break through the September high? Probably not…I think we get back up to the September high and then we'll see how things are going at that point. I don't know that we get there before the end of the year. I don't think we get back to the November low either."

The S&P hit a high of 1465 in September before tumbling to November's 1353 low.

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

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