US investors are keeping their fingers crossed that the legendary US consumer has not lost his or her appetite for spending ahead of the crucial pre-Christmas shopping season.
Analysts say the approaching week will be of particular importance because the Thanksgiving holiday week traditionally kicks off an annual shopping fest.
Concerns about the health of the US consumer are mounting, however, because of a nagging housing slump, a related credit crunch and surging energy costs.
Whether the nation's malls bulge with shoppers or struggle to get consumers in the door will have repercussions for Wall Street, which has been buffeted by the housing and credit woes.
The Dow Jones Industrial Average stock barometer gained 1.0 percent in the week to Friday to close at 13.176.79.
The broad market Standard & Poor's 500 rose 0.3 percent to 1,458.74 while the tech-rich NASDAQ increased 0.3 percent to 2,637.24.
ON THE ROPES
With the housing and credit markets on the ropes and rocketing crude oil prices making gasoline more costly at the pump, analysts say consumer spending has become even more vital than usual to US economic well-being.
BIG WEEK
"Next week is the big week for the consumer. The market is going to pay a lot of attention to it," said Marc Pado, an equities analyst at Cantor Fitzgerald.
Pado said the stock markets could rise or fall in coming weeks depending on sales reports from big retailers.
US retail sales, which account for around 70 percent of overall economic growth, showed a lackluster gain of 0.2 percent last month, according to a government report on Wednesday. The reading was the weakest since August when sales rose a tepid 0.1 percent.
Economists said they will also be awaiting the release of a consumer sentiment survey next week, published by the University of Michigan, which will reveal clues on whether Americans are maintaining or cutting back their spending.
"The decline in [consumer] sentiment, if sustained, suggests a weak holiday shopping season and is consistent with our view of weaker consumption in the near term," economists at Lehman Brothers said in a briefing note.
The release of minutes from the Federal Reserve's last interest rate policy meeting on Oct. 30 and Oct. 31, and reports on leading economic indicators and the housing market are also on Wall Street's radar for the week ahead.
The central bank cut borrowing costs for the second-straight month last month, by a quarter of a percentage point to 4.50 percent. Economists generally expect the Fed to hold its fed funds short-term interest rate steady at a policy meeting scheduled for Dec. 11.
ECONOMIC RELEASES
The leading indicators, Fed minutes and consumer sentiment survey will be released tomorrow, Tuesday and Wednesday respectively in an otherwise light week for major economic releases.
Bond prices strengthened in the past week as the yield on the 10-year Treasury bond tumbled to 4.150 percent from 4.225 percent a week earlier, and that on the 30-year Treasury fell to 4.523 percent from 4.602 percent. Bond prices and yields move in opposite directions.
WEAKER ACTIVITY: The sharpest deterioration was seen in the electronics and optical components sector, with the production index falling 13.2 points to 44.5 Taiwan’s manufacturing sector last month contracted for a second consecutive month, with the purchasing managers’ index (PMI) slipping to 48, reflecting ongoing caution over trade uncertainties, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The decline reflects growing caution among companies amid uncertainty surrounding US tariffs, semiconductor duties and automotive import levies, and it is also likely linked to fading front-loading activity, CIER president Lien Hsien-ming (連賢明) said. “Some clients have started shifting orders to Southeast Asian countries where tariff regimes are already clear,” Lien told a news conference. Firms across the supply chain are also lowering stock levels to mitigate
IN THE AIR: While most companies said they were committed to North American operations, some added that production and costs would depend on the outcome of a US trade probe Leading local contract electronics makers Wistron Corp (緯創), Quanta Computer Inc (廣達), Inventec Corp (英業達) and Compal Electronics Inc (仁寶) are to maintain their North American expansion plans, despite Washington’s 20 percent tariff on Taiwanese goods. Wistron said it has long maintained a presence in the US, while distributing production across Taiwan, North America, Southeast Asia and Europe. The company is in talks with customers to align capacity with their site preferences, a company official told the Taipei Times by telephone on Friday. The company is still in talks with clients over who would bear the tariff costs, with the outcome pending further
NEGOTIATIONS: Semiconductors play an outsized role in Taiwan’s industrial and economic development and are a major driver of the Taiwan-US trade imbalance With US President Donald Trump threatening to impose tariffs on semiconductors, Taiwan is expected to face a significant challenge, as information and communications technology (ICT) products account for more than 70 percent of its exports to the US, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) president Lien Hsien-ming (連賢明) said on Friday. Compared with other countries, semiconductors play a disproportionately large role in Taiwan’s industrial and economic development, Lien said. As the sixth-largest contributor to the US trade deficit, Taiwan recorded a US$73.9 billion trade surplus with the US last year — up from US$47.8 billion in 2023 — driven by strong
RESHAPING COMMERCE: Major industrialized economies accepted 15 percent duties on their products, while charges on items from Mexico, Canada and China are even bigger US President Donald Trump has unveiled a slew of new tariffs that boosted the average US rate on goods from across the world, forging ahead with his turbulent effort to reshape international commerce. The baseline rates for many trading partners remain unchanged at 10 percent from the duties Trump imposed in April, easing the worst fears of investors after the president had previously said they could double. Yet his move to raise tariffs on some Canadian goods to 35 percent threatens to inject fresh tensions into an already strained relationship, while nations such as Switzerland and New Zealand also saw increased
RSS