RPT-Wall St Week Ahead: Euro bears hit US bulls; jobs may help

(Repeating column initially sent on Friday; Updates Ireland’s
bailout)

By Edward Krudy

NEW YORK, Nov 28 (BestGrowthStock) – There is no sign that
investors’ headaches from Europe are going away, but early
indications of strong holiday spending and an improving labor
market could soothe Wall Street this week.

Fears that Europe’s debt crisis could spiral out of control
have pushed stocks off two-year highs hit earlier this month.
Since Nov. 5, the S&P has fallen 3.1 percent after running up
17 percent over the two months before that. At Friday’s close,
the S&P 500 was down 0.9 percent for the week, almost matching
the Dow’s 1 percent drop.

However, those fears have been countered by signs of a
gathering recovery in the labor market at home. The
government’s nonfarm payrolls report on Friday is set to be
another sign of a turnaround in hiring that could boost stocks
through the end of the year.

Anecdotal evidence suggests holiday shopping got off to a
good start. The S&P retail index (.RLX: ) rose more than 5
percent in the run up to “Black Friday,” the day after
Thanksgiving, when Americans traditionally take shopping malls
by storm.

Retail stocks’ gains are a sign of an increasingly bullish
view of the U.S. consumer after a string of stronger indicators
on jobs, sentiment and spending.

“The consumer is more confident and they are spending a bit
more money, and I think retail as a whole is perking up,” Gary
Bradshaw, portfolio manager at Hodges Capital Management in
Dallas said, adding that retail stocks “look relatively cheap
to us, and I think sales are going to surprise to the upside.”

Friday’s payrolls report is expected to show the economy
added 140,000 jobs in November, according to economists polled
by Reuters. If that forecast is met, the jobs data will fit a
pattern of growing strength in the labor market.

In October, companies hired at their fastest pace since
April, the government’s payrolls data showed, while the latest
weekly initial claims for unemployment benefits have dropped to
their lowest in over two years. November consumer sentiment
rose to the highest level since June. October consumer spending
also gained.

BLACK FRIDAY ANYTHING BUT BASIC

Early anecdotal evidence from Black Friday suggested
shoppers were spending and that discounts were not as deep this
year as last, potentially helping to lift retailers’ margins as
they look for the best holiday season in three years.

Black Friday marks the start of the holiday spending when
U.S. retailers traditionally turn a profit, or go into the
black for the year.

The National Retail Federation said that nearly 60 million
Americans planned to hit the stores over the weekend, while
another 78 million might join the crowds of shoppers. The NRF
will provide an update later on Sunday.

Retailers on the front lines will publish same-store sales
data on Thursday when they will likely comment on the weekend’s
events.

“It seems the American consumer is back with a vengeance,”
said Kim Caughey Forrest, a senior equity research analyst at
Fort Pitt Capital Group in Pittsburgh. “If we are to believe
CEOs of retailers, they feel they can support margins with
prices that are attracting consumers.”

Shares of Amazon.com (AMZN.O: ), a favorite online retailer,
have run up 12 percent since mid-November, and hit an all-time
high of $177.25 in the middle of last week.

RUMORS OF THE EURO’S DEMISE

Europe’s debt crisis could be the fly in the ointment,
though. Pundits predicting the euro’s demise are getting
serious attention.

European Commission President Jose Manuel Barroso denied on
Friday that a financial rescue plan was in the works for
Portugal and called a newspaper’s report that Portugal was
under pressure to seek a bailout “absolutely false,” while
Spain said it did not need help to manage its finances. But the
market was less sanguine and stocks took a nose dive.

The European Union on Sunday approved an 85 billion euro
($115 billion) rescue for Ireland, an EU source said, and was
set to announce outlines of a permanent system to try to
resolve Europe’s spreading debt crisis.

Finance ministers from the 16-nation euro zone, anxious to
prevent financial market contagion from engulfing Portugal and
Spain, endorsed an emergency loan package to help Dublin cover
bad bank debts and bridge a huge budget deficit.

All 27 EU finance ministers were expected to endorse the
broad outlines of the longer-term plan before markets open in
Asia Monday, the source said.

Kate Schapiro, who runs an international equity fund out of
San Francisco, said the declines in European stocks last week
had looked “really, really ugly.”

Her fund owns the New York-listed stock of Spain’s Banco
Santander (STD.N: ), which fell 15 percent this past week.

Schapiro says Santander and other European stocks may be
getting hit too hard and that strong companies are getting
caught up in the general selling.

“At the end of the day,” she said, “I think we are going to
muddle through this, and this could be a buying opportunity —
that’s my gut” feeling, she added.

S&P 500 ON FAMILIAR GROUND

Periods of decline in November have worked off the S&P
500’s overbought condition. The index has been finding support
at around 1,180 and resistance at 1,200. That may serve as a
short-term trading range.

Manny Weintraub, president of Integre Advisors in New York,
said low volume is likely to mark trading in the near term,
keeping stocks in their recent range.

“We’re entering a period with a lot of days of very weak
volume,” he said.

Bullish sentiment has been on the rise again, a factor that
may worry contrarian investors who see bullishness as a “sell”
signal.

Bullish sentiment rose 7.4 percentage points to 47.4
percent, according to the latest sentiment survey by the
American Association of Individual Investors. Bullish sentiment
has now spent 12 consecutive weeks above its historical average
of 39 percent despite some drops in November.
(Wall St Week Ahead appears every Sunday. Questions or
comments on this column can be e-mailed to:
edward.krudy(at)thomsonreuters.com)
(Reporting By Edward Krudy; Additional reporting by Rodrigo
Campos; Editing by Jan Paschal)

RPT-Wall St Week Ahead: Euro bears hit US bulls; jobs may help