Next week will be another balancing act for investors weighing negative data against hopes that fresh leadership on Capitol Hill will begin to turn the bleak economic tide.
Retailers will issue statements to characterize the results of Black Friday, the traditional start of holiday-shopping madness. But, this year, with layoffs increasing and household wealth declining, consumers have cut back mightily.
Retailers offered deep discounts and extended hours on Friday, hoping to lure in shoppers with the best bargains. Shoppers were lined up outside of
stores across the country, hoping to be the first in line to grab gifts on the cheap. Investors will be eager to see who comes out ahead in snagging those customers' tightly-held dollars.
"Certainly the retail results coming out of
Friday are going to be weighing heavily on the markets in the week to come," Ken Roberts, principal at Harbor Lights Financial. "It will be interesting to see how successful or unsuccessful Black Friday is."
Among the economic data to be unveiled next week, Roberts says that unemployment reports on Friday will have the most significant impact. Investors are keeping a watchful eye on those figures, which tie directly to productivity and corporate earnings, and the overall health of the economy.
The unemployment rate surged to 6.5% last month. Economists expect employers to have shed another 268,000 jobs in November, pushing the rate up to 6.7%, according to Thomson Reuters. Roberts expects the figures to be worse than the consensus, and expects unemployment will be a "key driver of the market going forward, at least through February."
will also release its Beige Book on Wednesday, offering anecdotal evidence of how local economies are faring throughout the country. Investors typically look for Beige Book clues about whether the Fed intends to alter interest-rate targets or make other monetary decisions to influence the economy. Although inflation was a key concern earlier this year, oil prices have plummeted to nearly one-third of their summer highs, to around $50 per barrel.
While lower gasoline prices have eased the burden on consumers, the Organization of the Petroleum Exporting Countries is holding an emergency meeting this weekend to discuss potential cuts to production. Without higher oil prices, OPEC nations that rely heavily on fossil-fuel revenue will face budget deficits, and are hoping that limiting supplies will push prices higher.
Still, consumers responded to high prices in a very effective manner by cutting back consumption. Combined with businesses cutting back in the slowing global economy, production cuts might not be enough to stanch bleeding demand.
"They cut production a month ago and it did not cut the slide in oil prices," Roberts notes. "It's not about supply -- I think there is sufficient supply. It's about the demand side of the equation which has deteriorated very, very dramatically."
On the flip side of weak economic data, investors are also closely watching the government's response. President-elect Barack Obama's choices for an economic advisory team, as well as his selection of New York Fed Governor Tim Geithner as Treasury secretary, boosted market confidence last week, but there is still overhanging uncertainty from the
and changeable approach to the financial crisis so far. Investors are hoping for both a seamless transition to a new White House and Congress, as well as a comprehensive approach to improve economic conditions.
Robert Pavlik, chief investment officer of Oaktree Asset Management, also notes that investors should be prepared for news concerning a potential bailout for Detroit's Big Three automakers,
. The deal is still being haggled over in Congress, and it's unclear what might occur. Investors are just getting over the near-collapse of
, which the government was forced to rescue last week.
While Pavlik does not necessarily support such a plan for automakers -- calling it a "terrible" waste of taxpayer dollars -- he also acknowledges that the market would probably look kindly upon its approval. "It could also keep the economy from spiraling into a deep recession," he says.
Amid the economic turmoil, banking crises and shift in power, Roberts says that investors will be looking for glimmers of opportunity emerging from the ruin. Instead of questioning whether things are bad, he says, "the Street's going to evaluate how 'less bad' the numbers are."