TheStreet.com's WEEKEND BULLETIN
November 27, 1999
Market Data as of 11/26/99, 1:35 PM ET:
o Dow Jones Industrial Average: 10,988.91 down 19.26, -0.17%
o Nasdaq Composite Index: 3,447.81 up 27.31, 0.80%
o S&P 500: 1,416.62 down 0.46, -0.03%
o TSC Internet: 985.61 up 17.57, 1.82%
o Russell 2000: 458.94 up 3.01, 0.66%
o 30-Year Treasury: 98 16/32 down 9/32, yield 6.226%
For the week:
o Dow Jones Industrial Average: down 0.1%
o Nasdaq Composite Index: up 2.3%
o S&P 500: down 0.4%
o TSC Internet: up 3.9%
o Russell 2000: down 0.5%
Companies in Today's Bulletin:
Federated Department Stores (FD:NYSE)
In Today's Bulletin:
o The Coming Week: In the Long Run, a Pullback Would Be Par for the Course
o Retail: Net, Schmet: Shoppers Flock to Bricks-and-Mortar Stores
o Retail: Black Friday no Biggie for E-tailers
o Bond Focus: Thanksgiving Completed, Bonds Purge
"TheStreet.com" on Fox News Channel
Robert Olstein, manager of the Olstein Financial Alert fund, returns for another round of "Stock Drill" this week. See how the picks from his last visit are faring and what he's got his eye on now. Plus, we'll offer up tax tips for year end investment moves and much more.
"TheStreet.com" on Fox News Channel airs Saturdays at 10 a.m. and 6 p.m. ET and Sundays at 10 a.m. ET.
FNC is Fox's 24-hour cable news channel. To find Fox News Channel in your area, call your local cable operator or see our "TSC on Fox TV" page at www.thestreet.com/tv.
Also on TheStreet.com:
Internet: Ariel's Run for the Roses Faces Steep Hurdles
The remote access card maker has quite a stock price to support.
Trade Winds: A Rough Week Ahead for Free Trade
As the World Trade Organization prepares for the Seattle Ministerial, protesters remind participants just what's at stake.
Nothing but Net: Shopping Frenzy Extends to Net Stocks
Surging e-tailers lead to strong finishes in both TheStreet.com Internet Sector index and TheStreet.com E-Commerce index.
Options Buzz: Low Prices Lure Options Pros to Play
Low volatility has options players mapping out their year-end strategies.
The Coming Week: In the Long Run, a Pullback Would Be
Par for the Course
11/26/99 6:00 PM ET
There's a lot of debate among historians on what records looked like exactly. Some say that they were cylindrical, others that they were disk-shaped. There's also a good deal of contention on whether records were made of a vinyl or some sort of resin or wax compound.
In any case, these things had grooves on them with little bumps in them. A record would rotate and a needle, or stylus, would run across the groove, reproducing sound. Occasionally, the record would get a scratch in it, and the needle would skip, repeating the sound like so:
The stock market needs a break ... The stock market needs a break ... The stock market needs a break...
Yep. That's what we keep hearing. The stock market needs a break. It needed a break four weeks ago, when the
was up 9.3% from its October low. It needed it two weeks ago, when it was up 11.9%. And, now that the S&P is up 15.8%, it still needs it.
Seriously, if you've been hanging around Wall Street for the past month, you've heard about the "pause that refreshes" so many times you could spit.
can't go up in a straight line forever
and people reckon that we're
due for a pullback
This seems the way it always works. People start talking about how the market needs a respite, and then it keeps on going up. And then the market comes in for a few days, and some guy on television talks about how the traders he talks to aren't concerned and how they consider the decline "healthy." And then you know the real pullback is on its way.
In any case, lots of people think stocks are ripe for some sort of selling -- particularly with the way bond yields have gone up since the Nov. 16
Federal Open Market Committee
"The market has been altogether too cavalier about the implications of higher interest rates on valuations," said Charles Crane, chief market strategist at
Key Asset Management
. "At some point, those higher rates are going to have a negative impact on the market. I would not be surprised if we run into another bout of selling pressure between now and year-end."
Crane thinks that stocks' reaction to this latest rate hike is similar to the reaction to the June one. There's this supposition that the Fed is done -- and of course the
says you're supposed to buy the last tightening. "It's very tempting to say that just because the market hasn't sold off immediately after the Fed raised rates, we're in the clear," he said. "I think that is too short a view."
The market doesn't really seem to be worrying too much about the bonds, though. Investors' attitude seems to be that the backup in the long-bond yield back to 6.2% doesn't matter because 6.2% is something they've seen before. A yield over 6.4%, on the other hand -- that would be scary.
So the bonds are the important thing in gauging how severe any pullback will be. "It's probably a minor decline as long as we avoid a shakeout in the bond market," said Greg Nie, chief technical analyst at
First Union Securities
. A falloff in bonds, on the other hand, could exacerbate any profit-taking in the stock market.
This is all very much to the point in the coming week, because there are a couple of big economic reports that could really shape the way bonds trade through the new year. The
National Association of Purchasing Management
index comes out Wednesday, and the monthly
mother of all economic reports
cough -- comes Friday.
The NAPM is important. The jobs report is more so.
"As far as the NAPM is concerned, it has been showing strong manufacturing growth," said Suzanne Rizzo, U.S. economist at
. "It could fall quite a bit and it would still be showing that. But employment is the Fed's key focus. It's clearly what's been motivating them to hike this year, and it's what we expect will continue to motivate them to hike more next year."
It's a given in the market that the Federal Open Market Committee will not hike at its Dec. 21 meeting -- too close to the date change -- and by most market participants' reckoning, it won't hike at the meeting in early February. But a strong employment report could boost the odds the Fed will up rates yet again, thinks
Morgan Stanley Dean Witter
money market economist Kevin Flanagan.
"If these numbers come on the robust side, odds are we will go through 6.25%
on the long bond and head back toward the 6.35%-to-6.4% level we saw in October," he said.
And that, no doubt, would cause a little trepidation in the stock market. After all, nobody wants to fight the Fed
Retail: Net, Schmet: Shoppers Flock to Bricks-and-Mortar Stores
11/26/99 5:13 PM ET
WHITE PLAINS, N.Y. -- The question that matters to Wall Street is not whether the stores are crowded this "Black Friday," but whether they're more crowded than they were last year.
Yes is the answer, according to the anecdotal post-holiday romp by this Mall Rat. Cars are backed up four deep just to enter the parking garage at
The Westchester Mall
, the tony shopping spot here that is anchored by
, and is located blocks away from
Saks Fifth Avenue
, a division of
Federated Department Stores
The scene inside is in stark contrast to 1997, when this reporter was forced to look elsewhere for signs of holiday spending on Black Friday (the day retailers are said to push from the red to black). At that time, this mall was so empty lines were the exception, not the rule. In '98, Friday shopping-mall traffic did seem stronger than 1997, but nowhere near this year's action.
The queue of customers waiting to check out of
, a division of the
, is 16 folks long. Who could resist those downy-soft, cashmere scarves for $70 a piece that I (longingly) noticed were quickly vanishing from a table near the store's entrance?
(a division of
Jones Apparel Group
, too, is so swamped it's tough to avoid stepping on someone's discarded shoe. Boxes waiting to be bagged pile up at the register. One teenager looks at her friend and says, "Gee, I like everything in here," unleashing a ripple of excited giggles between them.
Indeed, with roughly seven out of 10 shoppers carrying multiple bags, it doesn't appear that many people have forsaken the crowded malls for their computers today. Why haven't they saved themselves the trouble and shopped online?
"It's a family outing," says Jane Goldman, who is scouring the aisles of
Toys R Us
with her two daughters while her husband and son are visiting
The Sports Authority
Shopping as entertainment is especially true the day after Thanksgiving, when most people are off from work and spending time with their families.
And there are other charming features of the walls and windows of a mall.
"I don't know exactly what I'm looking for, and I like to browse around," says Arthur Cohen, who is holding a Gap bag and visiting the mall with his wife and son.
Then there are Pat and Julie Durant, who are hesitant to shop online after their son ordered a bunch of clothes that had to be returned. "If I had my choice, I'd buy in a store," Pat says.
Nevertheless, Chris Broom, an analyst with
Thomas Weisel Partners
, expects e-tailing to be the fastest-growing segment of the market this season. He estimates average household spending online this year will more than double, to $117 from $47 last year. Still, that's less than 1% of total retail dollars.
Overall, Broom expects this season to be "the best Christmas in five years." He is forecasting a 6% rise in sales for stores opened at least one year.
That's about in line with
National Retail Federation
projections, which are based on continuing strength in employment, income, consumer confidence, housing values and the stock market.
A survey commissioned by the NRF and conducted by
Deloitte & Touche
found that 79% of consumers will spend more or the same as they spent last year; 21% said they will spend less.
Despite those rosy projections, not all retailers were pulling the customers Friday.
, a division
, feels as richly decorated as someone's home -- but didn't have enough customers to give it a homey feeling. And
, a division of
, only has two customers at the register.
By contrast, Toys R Us, for all its troubles, had a steady stream of customers piling
Rock n' Roll Elmos
into big blue shopping carts.
Todd Slater, an analyst with
, points out that tracking sales for the holiday season is a lot trickier than measuring one day's receipts.
He says the pattern over the past decade has been a strong Thanksgiving, followed by weakness leading up to Christmas as shoppers wait until the last minute. The season typically closes with a rash of buying that helps retailers in the sprint to make their numbers.
"We have every reason to believe the fourth quarter will be very robust for the retail group. But between now and Christmas I expect a lot noise on both sides of the equation."
Friday, the only noise was music to retailers' ears: the sound of cash registers ringing.
Retail: Black Friday no Biggie for E-tailers
11/26/99 5:15 PM ET
Legend has it that on Black Friday, the post-Thanksgiving day when shoppers clog the malls, many retailers move into the black for the year.
Not so for e-tailers.
First, few are making profits anyway, so moving into the black isn't a possibility for now (the question remains whether it ever will be, but that's another story). Second, turkey-sated consumers are still more likely to spend Friday browsing the mall than sitting in front of the computer. And finally, over the past few weeks, online shoppers started ordering -- for e-tailers, the holiday season has already begun.
"While we certainly expect a lot of people to start their shopping this week, we won't see the same pattern on Friday" as at the mall, says Fiona Swerdlow, an analyst with
. "It's a big day for going to the store and looking at windows." That's also what
predicts, saying that it expects shoppers to push off logging on until Sunday evening, after they've toured a few malls.
The patterns of online shopping, says Swerdlow, mirror catalog shopping more than traditional mall-cruising. That means, in some cases, an early start on shopping. A
survey found that 50% of online shoppers have already begun to shop, while the other half expect to start over the long weekend, says Anthony Noto, a Goldman analyst.
"We've seen shoppers start a little early," says Paul Capelli, spokesman for
, who says traffic started picking up about two weeks ago.
Thomas Weisel Partners
put out a note indicating that Amazon's average daily traffic for the week ended Nov. 21 was up nearly 50% from the previous week, according to research from
To be sure, procrastination isn't going away. Traditional retailers have seen consumers push off their shopping until the very last minute, and many online shoppers will likely try to cut it close, too, says Swerdlow. But don't expect the kind of price-slashing that traditional retailers save for post-Christmas sales; waiting until after the big day itself isn't likely to yield the same kind of bargains. "Demand in the online world is more than supply," says Noto. "The opposite is true with land-based retailers."
Even as most people headed outside Friday, some had no choice but to confine their post-Thanksgiving spree to the Web. Heidi Anderson, a second-year resident at
Children's Hospital Medical Center
in Cincinnati, had to work today. During a break, she went online and spent about $100 on gifts. "If I wasn't working, I'd be out there," she says wistfully.
Bond Focus: Thanksgiving Completed, Bonds Purge
David A. Gaffen
11/26/99 2:06 PM ET
Just because it's quiet doesn't mean bonds can't trade lousy. The Treasury market was down today in a post-Thanksgiving Day session that saw less than 30% of the usual volume.
"The market still remains pretty burdened by
fears and a lack of demand," said Kim Rupert, senior economist at
Standard & Poor's MMS
. "People don't see any strong reason to get involved right now."
A sell-off in European bond markets caused similar overnight selling in the U.S. The bond market never recovered fully from the overnight pressure, as the 30-year bond ended down 13/32 to 98 15/32, boosting the yield 3 basis points to 6.24%.
The European bond markets sold off in response to a dive in the euro, which fell to 1.0158 from 1.0185. The yield on 10-year German Bunds rose overnight to 5.20% from 5.15% and Treasuries were marked down in sympathy. In addition, dollar/yen took a dive, dropping 2.60 to 101.69, also hurting U.S. assets.
After that, the market wasn't thrilled with this morning's
personal income and consumption
release. Personal income grew 1.3% in October, while consumption rose 0.6%. While housing and auto sales have slowed during the last couple months, this report shows that consumers have the wherewithal to continue spending.
Rupert said the market could get a lift from month-end buying early next week but will "go into defensive mode during the latter half of the week when we get the
report and payrolls," referring to the November
, to be released Friday.
"The market is going to maintain the same kind of level of concern," she said. "We know that the economy remains very strong and the growing risk is the Fed acts on the tight labor scenario as soon as the February meeting."
The National Association of Purchasing Management's manufacturing index, a nationwide survey of manufacturing sentiment, is released Wednesday. It's considered one of the most important anecdotal surveys of economic activity.
Economists polled by
expect the index will moderate slightly to 56.3 in November from 56.6 in October. A reading above 50 indicates expansion in manufacturing; less than 50 indicates contraction.
TO VIEW TSC'S ECONOMIC DATABANK, SEE:
Brenda Buttner will be appearing on Fox News Channel's "Fox & Friends,"Saturday, Nov. 27, at 8 a.m. EST.
Copyright 1999, TheStreet.com