The stock market's early bounce is fading but thus far the selling pressure has been mild. Investors are still nervous about the risk of Dubai defaulting on its debt but most tend to think the larger, richer nations in the U.A.E. will help bail out the struggling emirate. A bigger concern right now is a potential disappointment in consumer spending over the Black Friday weekend. This week we're going to see a lot of economic data and today's ISM report from the Chicago area came in positive.
Asian markets were strong on Monday. Most of the major indices recouped a large portion of their Friday losses thanks to short covering. Chinese officials said the government would keep their monetary policy loose and avoid cutting their stimulus too early. This announcement was made over the weekend and fueled big gains for the Chinese markets. The Shanghai index rallied 3.2% and closed out the month of November with its third monthly gain in a row. The Hong Kong Hang Seng rallied 3.25% for its biggest one-day gain in months. Nearby the Japanese NIKKEI gained 2.9%. Elsewhere in the region India said their GDP growth rate hit +7.9%, which was better than expected.
It was a different story in Europe. A Morgan Stanley analyst said the sell-off in the banking sector had been too steep and that exposure to Dubai debt is limited. Yet investors are nervous since European banks have the largest exposure to Dubai. A Reuters article said the U.A.E. was offering emergency support to any banks holding Dubai debt. European stocks spent most of the day in negative territory. There was an afternoon rally and they briefly flirted with positive territory on the stronger U.S. ISM data but eventually selling took over. The French CAC-40 lost 1.1%. Both the German DAX and English FTSE fell 1.05%. Not helping was a drop in British consumer confidence.
U.S. retailers were in the spotlight again as investors waited for results from the Black Friday holiday shopping. It looks like bulls are going to be disappointed. Crowds were bigger but consumers were spending less. The National Retail Federation said spending was down from a year ago and last year was horrible! The NRF is still forecasting a 1% decline compared to last year. The RLX retail index is down 1.4% on the session but it looks like online retailers are doing well. Cyber Monday spending is expected to grow. Consumers, after spending a weekend in the stores, shop the Internet for better deals online. Analytics firm comScore estimates that online spending on Black Friday hit a new record and they expect a new record for today. The poster child for online shopping is Amazon.com (AMZN) and the stock hit a new all-time high over $135 a share this morning.
The markets will be looking for positive economic data this week and this morning's Chicago ISM started the week on a strong note. Economists were expecting the Chicago-area ISM to drop from 54.2 to 53.0. Today's report came in at 56.1, marking the highest level since August 2008. Readings over the 50 mark indicate expansion and growth.
Currently the major stock market indices are in negative territory but they are trying to bounce off their lows of the session. The S&P 500 and the Dow Industrials are almost back to positive territory while the NASDAQ and the small cap Russell 2000 are lagging behind their peers. A drop in the dollar is offering a small boost to commodities like gold and oil. Natural gas seems to be the exception with nat gas down almost 7% on the session.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
I am not seeing a lot of movement on the OptionInvestor.com play list. I would keep an eye on CPLA, which is testing support near $70.00 and its 50-dma. Two stocks that are on the move are GS and NTRS, which are enjoying gains (an oversold bounce?) thanks to strength in the financial sector.