Market Insider

Look Ahead: Strategists See Modestly Higher 2010

Stocks should make a more subdued move higher in the coming year, and the Fed is not likely to raise interest rates until at least mid-year.

A New York Stock Exchange trader.
Oliver Quillia for

That is the collective view of nine major Wall Street banks, which on average forecast a 9.5 percent gain in the S&P 500 to a level of 1222 for 2010. The S&P, so far this year, has gained 24 percent, more than the Dow's 19 percent and behind the Nasdaq's 43 percent.

The consensus view from the nine banks is to "underweight" or "bench mark" U.S. equities. They also expect gold at $1,213 an ounce; oil at $80 per barrel and the dollar versus the euro at a level of $1.45, slightly below where it is now.

This tally is courtesy of Birinyi Associates, which combed through some 3,500 pages of 2010 outlooks and compiled the expectations of the firms. Their average outlook for the U.S. economy includes growth of 3.1 percent. The firm with the lowest growth forecast was Goldman Sachs, at 2.1 percent, and the most bullish on growth was Deutsche Bank, at 4.9 percent.

"It surprised me that a lot of them were in the same ball park," said Kevin Pleines, the analyst at Birinyi who compiled the findings. "It did surprise me that there was a consistency, especially for sustained growth in the first half and then for the third and fourth quarter, there seems to be a lot less consistency and more uncertainty."

What to Watch

On Wednesday, personal income and spending for November is released at 8:30 a.m. December consumer sentiment is issued at 9:55 a.m., and new home sales for November are released at 10 a.m.

Stocks Tuesday finished higher, with the S&P up 3 at 1198, and the Dow at 10,464, up 50. The dollar was higher against a basket of currencies. The dollar gained against the euro to $1.4250 in afternoon trading. Gold continued its decline and oil was slightly higher. Bonds saw selling, which pushed the yield on the 10-year higher to a level of 3.744 percent.

Economic data on Tuesday was mixed with a disappointing final read on third quarter GDP of 2.2 percent. Economists were looking for growth of 2.7 percent. But existing home sales were stronger than expectations, rising 7.4 percent in November to an annual rate of 6.54 million.

Jingle Bells

Cash registers weren't ringing as much this past weekend as they did a year ago, according to ShopperTrak. Retail sales fell 12.6 percent on Saturday, when a major snowstorm swept up the east coast. The Northeast showed the steepest decline, down 17 percent. But online shopping benefited, rising 13 percent to $767 million this past weekend.

Analysts and economists have been watching the holiday shopping season closely to get a sense of consumer attitudes and what that might mean for the economy.

Citigroup's Tobias Levkovich said the top 20 percent of consumers are the ones most that hold 90 percent of the stocks, and the market's appreciation should have helped brighten their spirits somewhat.

He provided an interesting breakdown of how this consumer group has affected the economy. Historically, the U.S. consumer has accounted for 70 percent of GDP. (14 percent of that goes to health care)

The top 20 percent is responsible for 40 percent of all spending. But when it comes to spending on discretionary items — the types of things you want as holiday gifts — that top group accounts for 50 percent, equal to the spending of the other 80 percent.

— Questions? Comments? marketinsider@cnbc.