November 5, 2009, 7:00 am … 
The Standard & Poor’s 500 index futures are down 1.45 to 1045.20, as traders play on hope for a merrier holiday season and for the health of the overall economy. The reports, based on sales at stores opened at least a year, are expected to show the second consecutive monthly gain after more than a year of declines. These figures are considered a key barometer of retailers’ health. Analysts will mine the reports to get more details on how shoppers are starting to treat themselves to little indulgences like new boots and are purchasing some merchandise at full price. … SpendingPulse, a service of MasterCard Advisors, reported Wednesday that jewelry (up 7.2 percent) and clothing (up 3.4 percent) showed signs of life in October compared with a year earlier, when spending was in a free fall. But those figures were well below the levels two years ago and only slightly better than 2005. SpendingPulse estimates sales in all payment forms including cash and checks. A flurry of apparel retailers from T.J. Maxx to J. Crew Group Inc. have raised their profit outlooks in recent weeks. … Consumer spending accounts for about 70 percent of all economic activity by federal measures, so evidence that consumers are opening their wallets a little more could provide incentive for factories to step up production of goods. Signs of life in spending “should offer evidence that these businesses need to start boosting their investment to feed this return of consumer demand,” said Frank Badillo, senior economist at consulting group TNS Retail Forward. Cooler weather helped October sales of plaid shirts and leggings. Ken Perkins, president of retail research firm Retail Metrics, said early holiday discounts also may have drawn shoppers last month. There’s concern about the fragility of American consumers who continue to grapple with tight credit and weak employment. More than 6 million additional people were jobless in September 2009 than in September 2008. As a result, consumer confidence has been choppy in recent months, rising above its February low, but still far from levels that would mean the economy is on solid footing. Michael P. Niemira, chief economist at the International Council of Shopping Centers, expects its analysis of sales at stores opened at least a year for October to show at least a 1 percent gain. That estimate compares with a 4.2 percent decline in October 2008. The figures exclude Wal-Mart Stores Inc., which stopped reporting monthly sales after reporting April results. Retail Metrics’ Perkins raised his projection to a 2 percent gain, up from 1.4 percent earlier in the month, helped by improving business at department stores. Unlike ICSC-Goldman Sachs tally, Perkins’ roster excludes privately held companies. That compares with a 3.5 percent decline from a year ago. Any sales momentum would raise hope for the holiday shopping season. Stores are entering the season with leaner inventories from a year ago, and are offering targeted discounts. That’s a big difference from the scenario that stores found themselves in last year when they were discounting piles of holiday inventory stuck in the pipelines after consumers went into hibernation. Still, many companies are also maintaining a conservative stance. Roger Farah, chief operating officer at Polo Ralph Lauren, said he’s encouraged by signs that “those that have money are beginning to spend … again.” But sales remain at “depressed levels,” so the company is being cautious with inventory. Like many companies, it would rather scramble to restock certain items that sell out than be stuck with lots of leftovers.
World stock markets fell Thursday after the U.S. Federal Reserve cautioned about the wider economic impact of rising unemployment. Investors awaited interest rate decisions in Europe later in the day. The Fed indicated Wednesday that it would keep its benchmark interest rate at near zero percent “for an extended period” even though it conceded that economic activity had picked up. The Fed warned household spending would remain “constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit.” Similar statements are expected from the European Central Bank and the Bank of England later when they announce their latest interest rate decisions later. Both banks are expected to keep borrowing costs on hold for some time. The Bank of England, however, may expand the amount of money it pumps into the British economy, which unexpectedly stayed in recession in the third quarter. As a result, analysts said the FTSE 100 index of leading British shares could be in for a more volatile day than its counterparts in Europe. Ahead of the Bank of England decision expected at 1200 GMT, the FTSE was down 40.80 points, or 0.8 percent, at 5,067.09. Meanwhile, Germany’s DAX was 34.53 points, or 0.6 percent, lower to 5,409.70 while the CAC-40 in France was 21.03 points, or 0.6 percent, lower at 3,649.30. The ECB decision is due at 1245 GMT. Once the central banks have left the stage, investors will start to turn their attention to Friday’s crucial U.S. nonfarm payrolls report for October. The jobs data often set the stock market tone for a week or two. At the moment, analysts expect payrolls to have fallen by around 175,000 during the month, while the unemployment rate is expected to tick up further to, or just below, 10 percent. “Of course, the U.S. nonfarm payrolls…will likely prove instrumental in defining where the major indices end the week,” said Cameron Peacock, a market analyst at IG Markets. Many analysts think that the markets are at a crucial juncture and that stocks, which have rallied for most of the year, could be facing a year-end slide. Over the last couple of months, most of the dips have proved to be short-lived. However, the markets have been very volatile over the last couple of weeks, with many traders wondering whether current stock valuations are justified by the wider economic fundamentals, especially if the global economic recovery peters out as pent-up demand and restocking fizzle out. … Earlier, Japanese shares helped lead Asian stocks lower, with the Nikkei 225 stock average falling 126.87 points, or 1.3 percent, to 9,717.44. South Korea’s market pulled back 1.8 percent to 1,552.24, while Hong Kong’s Hang Seng was down 0.6 percent at 21,479.08. Markets in Indonesia, Singapore and Australia also slid but Chinese shares bucked the downward trend to gain modestly. … Oil prices fell back below $80 a barrel amid the economic uncertainty, with benchmark crude for December delivery down 49 cents to $79.91 a barrel. Gold, meanwhile, rose $1, or about 0.1 percent, to $1,088.40 an ounce. The dollar slipped 0.6 percent to 90.21 yen while the euro fell 0.2 percent to $1.4845.… Allow the tape to dictate events. In the near term 1095 – 1112 range remains first test to higher values for Standard & Poor’s 500 index. Continue to use 1166.36 as primary mid-term resistance and support at 1025.19. Trade both sides of market, taking profits, reducing laggards and remain committed, but defensive.