OUTLOOK.
CONSUMER CONFIDENCE
Looking less grim
When surveyors ask Americans how things are going, they invariably respond with scowls and frowns. They express a litany of concerns about the economy, global instability and the possibility of job loss.
Get the same group into a department store or auto dealership, however, and the story changes. While few may appear giddy over the selections, many are quick to apply for credit or to sign on the dotted line for furniture or shiny new metal.
That brings us to Tuesday’s report of November consumer confidence. In October, the index tumbled to 79.4, from 93.7 a month earlier.
Chicago economist Diane Swonk expects Tuesday’s number to show a rebound of at least several points.
“There are better headlines all around. The elections are over, jobless claims are declining, the stock market is making gains and confidence is coming back,” said Swonk, chief economist at Bank One Corp.
She said the one big negative is a possibility of war with Iraq, “but consumers don’t seem to regard that as a factor in their plans for holiday spending.”
Meanwhile, Swonk said, retailers are reporting that sales are coming in better than expected. That means stores won’t get stuck with huge levels of unsold inventories.
“This could be a holiday season when it doesn’t pay to wait until the last minute,” she said. “On the other hand, we know what consumers want: deals, deals and more deals.”
BEIGE BOOK
Fed out of ammo?
Those who believe the Federal Reserve is out of ammunition to stimulate a lackluster economy will look to Wednesday’s beige book report for clues about what, if anything, the central bank might do next.
Chicago banker Kenneth Skopec is in the camp that, despite protestations from Fed Chairman Alan Greenspan, the list of options is down to nearly nil.
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“All the arrows are out of the central bank’s quiver,” said Skopec, vice chairman of MB Financial Bank. Earlier this month, the Fed reduced short-term interest rates to 1.25 percent.
With the nation’s manufacturing sector in a slowdown, Skopec said, the next moves to boost the economy must come from President Bush and the incoming Congress.
“It’s only fair that people will demand results, and the president now has all his own players,” he said. “It’s time for an economic plan. Mr. Bush and the Republicans have two years to get things done–at this point, they can’t make excuses.”
NEW-HOME SALES
Still booming
A list of reports in coming days includes October existing-home sales Monday, the month’s new-home sales Tuesday, a revision of third-quarter gross domestic product, also Tuesday, and October orders for durable goods Wednesday.
Of the group, watch new-home sales. Analysts are expecting them to track at boom levels above 1 million units annually, for a third month in a row. The housing market has continued to confound pessimists, and few builders are indicating any slowdown in their construction plans for 2003.
EQUITIES
Waiting for a rally
In the wake of a five-week rally that boosted prices by about 22 percent, the stock market has gone into a November lull. The action has been muted, with only modest moves up and down on limited volumes.
Flossmoor investment adviser Richard Evans says stocks have managed to consolidate gains and build a healthy base. That means the next move higher could be dramatic.
For the Dow Jones industrial average, which finished the week around 8805, he is telling clients in his Renaissance Report newsletter, the latest rally could “generate the momentum needed to take out the August highs, and then some.”
Evans added that “such a move could generate a period of panic buying, as those who bet on lower prices would need to cover their wagers.”
Those who believe the market remains stuck in the claws of a bear note that in August the Dow managed to finish above 9000, but for only a single session.