Wall St Week Ahead: Euro bears jolt US bulls but jobs may help

By Edward Krudy

NEW YORK, Nov 26 (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 next 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,” said Gary
Bradshaw, portfolio manager at Hodges Capital Management in Dallas,
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 plan to hit the stores over the weekend, while another 78
million might join the crowds of shoppers. The NRF will provide an
update 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, 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 mid-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.

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

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

Wall St Week Ahead: Euro bears jolt US bulls but jobs may help