What's Important in the Financial World (11/28/2011) Robust Holiday Sales, Bank Stock Turnarounds

The Thanksgiving/Black Friday weekend yielded much better retail figures that expected. This signals that retail sales could return to the robust level of the mid-2000s, before the recession began. That, in turn, would bode well for U.S. GDP above 3% for the final quarter of the year. The National Retail Federation said total store revenue for the weekend reached $52 billion. “Digging deep into their holiday budgets, the average holiday shopper spent $398.62 this weekend, up from $365.34 last year,” the NRF reported. Data from Comscore indicated that online sales rose 26% on Black Friday itself to $816 million.

The OECD warned that the eurozone and U.S. are teetering on the brink of recession. The primary threat in Europe is that there will be no conclusive action taken to aid weak economies that may default on their sovereign debt. This is a political problem to the extent that Germany would have to support any broad solution. The trouble in the U.S. is also political. The OECD said that Washington gridlock could prevent America from instituting policy decisions to bring down the deficit and stimulate economic growth.

The single most important announcement for the financial markets this week is probably U.S. unemployment numbers for November. Challenger Gray will announced layoffs for the month. ADP will release its private payroll figures. Then, on Friday at 8:30 AM, the federal government will post its employment statistics. Economist are not sanguine about the state of the jobs market in November. Bloomberg reports that “Payrolls climbed by 120,000 workers after rising 80,000 in October, according to the median forecast of 59 economists in a Bloomberg News survey before a Dec. 2 report from the Labor Department.”

A possible solution to the EU crisis, at least a temporary one, will cause a rally in U.S. stocks that could last the better part of the week. Which stocks will benefit? Almost certainly those of beleaguered banks. Investors believe that the largest financial firms have more exposure to the Europe debt crisis than they have stated. There is also concern that a slowing economy will cut sharply into investment bank revenue. Proprietary trading results have also been weak, and investment houses like Goldman Sachs (NYSE: GS) have been unable to make the amount of money that they did from this activity in the past. Watch for Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS), which trade at multiyear lows, to rebound.

Douglas A. McIntyre