All traders want in the final week before Christmas are tame inflation data to spark a rally. "We are seeing a dissipation in tax-loss selling, so as long as the inflation numbers are in line, we could see a small Santa Claus rally before people head home for the holidays," says Larry Wachtel, senior market analyst for Wachovia Securities. The producer price index for November will be released on Tuesday. According to Thomson First Call, economists predict the PPI will fall 0.4%, reversing the gain of 0.7% in October. The core PPI, which excludes food and energy, however, is expected to rise 0.2%, compared with a drop of 0.3% the prior month. Larry Perruzzi, equity trader for Boston Company Asset Management, says that since crude prices were down in November, there's a chance that the inflation data will be better than expected. "Nevertheless, even if we get a surprise, it's going to be tough for the Dow to break through 11,000, since it will be a low-volume week," he says. The Dow Jones Industrial Average has attempted to pierce the 11,000 mark three times but has come up short on each attempt. Building permits and housing starts for November also will be released Tuesday, and that should fuel discussion about the status of the so-called housing bubble. Building permits for November are expected to drop to 2.08 million from 2.1 million in October, while housing starts are anticipated to remain flat at 2.01 million. "We do get a lot of housing-related data,
and that may depress or reinvigorate investors," says Randy Diamond, a sales trader at Miller Tabak. "But if there are no serious surprises, traders will just say, 'See you next year!' So there is a strong likelihood there are just two real trading days left in 2005."
Final third-quarter GDP and chain-deflator data will be released on Wednesday. Experts closing the book on the third quarter expect the economy to have grown at a rate of 4.3%. On Thursday, personal income and spending data for November will be released. Economists predict incomes climbed 0.3% for the month, a tad lower than the 0.4% rise the prior month. Personal spending, on the other hand, is expected to rise to 0.4% from 0.2% in October, signaling once again that Americans have more going out than coming in. "Consumers have shown few signs of stopping their rampant spending, even though economists keep forecasting that they will," says Gina Martin, an economist with Wachovia. Spending will return to the spotlight on Friday, when durable-goods orders for November are announced. According to First Call, economists anticipate an increase of 1%, down from the 3.4% growth the prior month. December's Michigan sentiment survey also will be reported on Friday. The consumer sentiment index is expected to rise to 90 from 88.7.
A slew of high-profile companies are scheduled to report earnings on Wednesday, including tech bigwigs 3Com ( COMS), Red Hat ( RHAT), Tibco Software ( TIBX) and Research In Motion ( RIMM). A handful of retailers are also due to take the spotlight on Wednesday, and that should provide some needed insight into the spending health of the U.S. consumer. Among the retailers scheduled to report are Bed Bath & Beyond ( BBBY), Family Dollar ( FDO) and Finish Line ( FINL). Food giants General Mills ( GIS) and ConAgra Foods ( CAG) report results on Thursday, capping the earnings reports for the week as investors close up shop for the holidays.