Stocks remain within striking distance of key milestone
levels, with the S&P 500 just 4 points away from 1800 and the
Dow Jones Industrial average less than 50 points away from 16000.
Given the market's recent momentum, it's hard to envision any
scenario where wouldn't see stocks reaching these record levels
in the coming days, perhaps as soon as today.
The market's phenomenal recent run may have had multiple drivers,
but the Fed's extraordinarily supportive role has to take the
pride of place on that list of factors. Even market bulls have to
acknowledge that the coming change in the Fed's policy stance
will likely not be smooth for the stock market. The market was
understandably happy with Janet Yellen's testimony last week, as
she essentially came across as continuation of the Bernanke
regime. This does not mean, however, that the December Taper was
off the table. I continue to believe that if economic data in the
coming days maintains the recent positive momentum, then we could
very well see the Taper announcement in Bernanke's last meeting
as Fed Chairman in December. The key economic report on that
front will be the next government jobs report.
Before we get the November non-farm payroll report early next
month, we will get a sense of how the retail scene is unfolding
this holiday season. Early indicators are not very inspiring, but
it will be premature to read too much into them. The soft
University of Michigan Consumer Sentiment survey for November
adds to the uncertain backdrop created by
) underwhelming outlook and the overly promotional aspect of this
year's season. But on the flip side, household finances are in
their best shape since the downturn with lower overall debt
levels and modestly higher pay. The steadily improving labor
market, wealth effect from the stock market's impressive gains,
and favorable housing markets momentum all raise hopes that
holiday spending could surprise to the upside.
) report this Thursday will give us a better sense of whether
Wal-Mart's woes are company specific and a function of
competitive pressures or reflective of problems at the low end of
the consumer economy. It was surprising that the retailing giant
didn't acknowledge the beneficial effects of the recent drop in
gasoline prices, but we will find out more in the coming
In the meantime, we should get ready to celebrate the market's
new milestone levels. Dow 16K hats anyone?
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