Tags: Reeves | holiday | spending | stocks

MarketWatch's Reeves: Holiday Spending Might Spark 'Turnaround' for Stocks

By    |   Thursday, 23 October 2014 11:45 AM

A strong holiday shopping season might be just the positive news needed to boost stocks, says MarketWatch columnist Jeff Reeves.

The National Retail Federation (NRF) predicts a 4.1 percent rise in holiday spending this year from 2013. That compares with a 3.1 percent increase last year and an average appreciation of 2.9 percent for the last decade.

Investors will soon turn their focus to consumer spending as the holidays approach, Reeves writes. "And if you're looking for a reason to believe in a big turnaround for stocks, spending could be it."

To be sure, the S&P 500 index already has rebounded 7 percent from its Oct. 15 low, so it's not clear that the market needs any elixir at this point.

It's also not clear that the NRF's estimate will prove to be accurate. Retail sales slid 0.3 percent in September.

"It seems that anyone who tells you that consumers are 'back' is being a bit charitable. The big picture is that wages remain under pressure and the state of American finances remains fragile despite improvements on many fronts since the Great Recession," he notes.

"The bottom line is that falling gas prices have provided a much needed stimulus to family budgets, and that accounts for much of the optimism we see now. However . . . it does appear that, for a mix of complicated reasons, consumers will have a bit more cash and a bit more confidence as we enter the holiday season," Reeves adds.

"With a backdrop like this, it's reasonable to expect consumers to keep spending in the current quarter, and perhaps supply a much-needed boost to the economy over the holidays."

"The fact that real wages and salaries haven't picked up that dramatically, it puts a ceiling on how much spending can accelerate," Omair Sharif, an economist at RBS Securities, told Bloomberg.

Average hourly wages rose 2 percent in the 12 months through September.

"It seems like relatively widespread softness in spending. The pickup in consumption that we're all waiting for hasn't quite taken off yet," he said.

To be fair, things looked better in August, when retail sales climbed 0.6 percent, the biggest advance in four months.

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A strong holiday shopping season might be just the positive news needed to boost stocks, says MarketWatch columnist Jeff Reeves.
Reeves, holiday, spending, stocks
Thursday, 23 October 2014 11:45 AM
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