December arrives with most investors begging for one thing: 1998.
The last several months have provided nothing but rocky terrain for investors who had become accustomed to steady, easy growth since the beginning of 1995. The major averages find themselves unable to break free from trading ranges, and year-end predictions of
, snickered at in July, now look surprisingly prescient.
This first week of December will help set the tone for what should be a tense four-week run to the end of the year. Only a handful of earnings reports are due. Among the more significant,
, which reports on Thursday.
estimates are for the company to earn 44 cents a share. Investors hope NSM's numbers will give them more clues on how Asian activity is affecting chip pricing power and sector strength moving forward. Though NSM is hardly a dominating company, its indications will still carry some weight with fretful chip investors. As pointed out in last week's
editor's letter, the weakness of chip stocks, especially
, is a glaring problem for bullish thinkers.
With little other earnings news, market players will focus on two other major issues this week: Asia and the U.S. economy.
In Asia, South Korea's problems show little sign of abating. Indeed, after the
announced plans for a $20 billion bailout package, the South Korean stock market sold off as investors fretted that the relief would not be enough to stanch the bleeding. Rumblings on Friday morning hinted that some investors now fear for the stability of the entire South Korean financial system.
Japan seems to have achieved some steadiness, but the waters remain murky. The government is under heavy pressure to produce a more vigorous stimulus package, and it is expected to unveil a plan perhaps as early as this week. Though the financial system is taking hits, economists point out that Japan still has an amazing amount of domestic savings to draw from. For those believing that Japan would fall off the cliff, the country presented a surprise: The government said it would send aid money to South Korea.
Certainly, Asian stumblings will continue to hector the U.S. markets. But focus could return to domestic concerns later in the week. As global markets have flailed through the last several months, a so-called flight-to-quality has helped drive bond prices higher and yields sharply lower. The benchmark 30-year bond is yielding close to 6%, meaning that investors fear future inflation in the U.S. about as much as they expect the Cubs to win the next World Series.
Domestic economic measures, however, show that the U.S. economy remains robust. October personal income and spending each rose 0.5% and retail activity showed bursts of excitement on Friday. The November jobs report, to be released Friday, will likely provide another window on labor tightness and rising wages. Bond participants, swimming in 6% yields, will most definitely focus on the Friday jobs news, perhaps as early as Tuesday morning.
Other items of interest this week:
reports on Dec. 2 and is expected to have earnings of 15 cents a share.
reports on Dec. 4 and is expected to have earnings of 65 cents a share.
National Association of Purchasing Management
index is due at 10 a.m. EST on Dec. 1. The index came in at 56.0 in October.
Beige Book report, an anecdotal survey of Fed Bank districts, is due out on Dec. 3.
Along with employment figures, details on Factory Orders and Consumer Installment Credit will also be released on Dec. 5.