Retailers on Thursday will report December sales results, taking the wraps off their holiday season and possibly showing the best comparisons in 20 months.
Thomson Reuters projects that the 30 chain stores it follows will show a 2 percent increase in same store sales for December, the best monthly improvement since the 3.4 percent gain in April, 2008. Discounters are expected to turn in a 3.9 percent same store sales gain, and teen apparel, as the laggard, is expected to show a 4.3 percent decline.
Besides retailers, investors will focus on the weekly jobless claims report at 8:30 a.m., of particular interest ahead of Friday's key December jobs report.
"I think people are just starting to ease money into this market. We've seen some programs," said Patrick Boyle of LaBranche Financial. "I am assuming you're going to see retirement money coming in and getting put to work in January. It always happens that way."
Boyle said investors will focus on the retailers Thursday, but the next catalysts should be the jobs report and then the coming earnings season. "All the focus is going to be on the next three weeks of earnings. I think that's more important for the short term than this jobs number, but it will create a little volatility and I think people are looking for that."
Expectations are for a loss of 10,000 non farm payrolls, but there are some economists who expect to see a positive number for jobs. "If the jobs number is positive, then everything goes higher," he said.
Retail analyst Daniel Binder follows big box stores for Jefferies, and he thinks there could be some better than expected news in the sales numbers.
"I think they're going to show upside surprises form plan..broadly speaking. After November came up a little soft, you had a lot of retailers keeping the plans for December conservative because they just weren't sure," he said. But "the weather got cold. That was accommodative and Christmas came."
Target is one he thinks could show an upside surprise from its plan of a 1.5 percent decline. He said the number could be as much as a 2 percent gain. Costco also could produce a surprising gain of 7 to 8 percent, or 2 to 3 percent after international sales and gasoline are stripped out. The story for Costco, he said, could be margin improvement.
A loser could be B.J.'s Wholesale . "I think B.J.s will be one of the standouts coming up short of plan. Their plan was 5 to 7 percent for November and December," he said. November was already a little lighter than expected, and the major December snow storm on the east coast affected the areas around about 70 percent of B.J.'s store base.
Binder said Best Buy is expected to show a 7 to 9 percent increase, when it reports sales on Friday, after most of the rest of the industry. He also said Family Dollar's better than expected report Wednesday was a good sign for Wal-mart , which shares the same core customer but does not issue monthly sales.
Bed Bath and Beyond released earnings after Wednesday's bell, reporting a surprise earnings increase of 73 percent to $151.3 million, and it raised its forecast for the year. Bed Bath and Beyond, in part, has benefited from the bankruptcy of its formal rival, Linens and Things .
"The (holiday) season will probably show a 2 to 3 percent increase. That's my guess," said Binder.
Several earnings releases are expected Thursday, including Constellation Brands and Lennar ahead of the open. Apollo Group reports after the close.
Stocks meandered once more Wednesday, with the Dow finishing up 1 at 10,573; the Nasdaq down 7 at 2301, and the S&P 500 rising just under a point to 1137.
"Anyone trading the indexes right now is frustrated..but underneath the surface, there's a lot of great action. The sector rotation has been great for traders," said Scott Redler, who follows the market's technicals at T3Live.com.
Best performers Wednesday were materials, up 1.5 percent and energy, up 1 percent. Some key commodities also moved higher as the dollar declined against the euro. Oil was up $1.41 to $83.18 per barrel and gold rose $17.80 per ounce to $1,136.50.
Redler said some stocks that were in favor between Christmas and New Year's have lost some ground, but others have moved up. Solars, like Solarfun Power and JA Solar rose sharply after Oppenheimer raised estimates. Metals got a push from Goldman Sachs, with names like U.S. Steel moving higher. Alcoa jumped 5 percent.
Financials were up 0.4 percent. "The XLF (financial ETF) broke its fifty day moving average Monday and has had a nice follow through for the past two days. The early birds saw this when Goldman Sachs broke its downtrend on December 30," said Redler.
"It (financials) was a very profitable tradable sector which is showing health through the start of the year...but now after a three or day move, traders are going to look for a new place to go," he said.
One area to watch though is tech. Even as the Consumer Electronics Show is underway in Las Vegas this week, some of the biggest names in the tech world lost ground.
"On a cautionary note, the money's trading out of big cap tech for the moment. We're starting to see some technical damage, like Google breaking its upper range and selling into its new product launch," he said. He pointed to downward moves in other tech favorites, Apple and Amazon.
"Whenever you see a big leadership group like big cap tech break technicals, you have to ask if the market's getting tired here," he said.
Treasurys were mostly lower after the Fed's December minutes showed the Fed is clearly conflicted about the approaching end of its mortgage purchase program. Traders have been speculating the program could be extended beyond its March deadline because the Fed's wind down could have a negative impact on rates.
The minutes show that Fed officials disagreed over whether to increase or pull back on the program to buy mortgage securities.
"It's all "if" and so maybe the Fed extends it, but it's not a trade that we could do much with today, this week, this month, but nonetheless they opened the door on it," said David Ader, chief Treasury strategist at CRT Capital.
He said while the Fed was a factor, the billions in new corporate issuance is really what's moving the bond market. "I think the greater pressure on the market was another day of very massive deal issuance. Today, we're probably looking at $17 billion.. I think that today in particular we had nearly $2 billion in the 30-year sector. If you take a look at the yield curve, the 30-year is the gross underperformer."
Ader said the Fed statement did catch the market off guard though there has been rumblings about the mortgage program as its anticipated conclusion draws near. He did say there was no sign the Fed would raise rates and that it did downgrade its growth forecast slightly. "Broadly speaking, it was more dovish," he said.
Some of the names on the corporate calendar this week include Lloyds , GE Capital and Berkshire Hathaway . Traders attach special importance to the presence of Warren Buffett's Berkshire Hathaway on the calendar because it may signal that the widely followed investor wants to get a deal done now because he sees rates rising.
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