Sales figures for the start of the holiday shopping season may signal whether US stocks can extend a two-month rally.
Consumers have driven an economic recovery this year as companies curbed spending. Results from the nation's retailers will suggest if the economy, and companies' profit growth, will pick up, some investors said.
"Business capital expenditures are out of commission until next year, so the consumer has to bridge into the second quarter of 2003," said Christopher Wolfe, an equity strategist at JP Morgan Private Bank, which oversees US$230 billion. "These three days take on added importance."
Wal-Mart Stores Inc, the world's largest retailer, reported a single-day sales record of US$1.43 billion yesterday as holiday shoppers stuffed their carts with electronics, small appliances and toys. The sales represent a 14 percent increase from last year's US$1.25 billion, recorded the day after Thanksgiving, the company today said in a statement.
Wolfe has been buying Federated Department Stores Inc and Wendy's International Inc, saying he expects people will keep spending, amid signs that job losses are slowing and corporate earnings are expanding.
Consumer purchases, which account for about two-thirds of the economy, climbed 3.7 percent in the 12 months ended in September, the government reported this week. Investment in new factories and equipment dropped 5.1 percent in the same period.
"If they have a good Thanksgiving weekend, then that would be a catalyst going forward" for stocks to gain, said Rita Whig, who manages US$850 million in US stocks, at Invesco Perpetual, a UK fund manager.
"This weekend is crucial."
Stocks have rallied since Oct. 9, when the Dow Jones Industrial Average and Standard & Poor's 500 Index reached their lowest levels in five years.
The Dow has recorded its biggest two-month gain since 1987.
The average jumped 5.9 percent in November after rising 11 percent in October. The S&P 500 climbed 5.7 percent this month and the NASDAQ Composite Index has advanced 11 percent. Still all three indexes are headed toward their third year of losses.
For the week, the Dow advanced 1 percent, its eighth straight weekly gain, the longest such streak since 1998. The S&P 500 rose 0.6 percent and the NASDAQ gained 0.7.
Sales at stores open more than a year in the November-December period are expected to rise 3 percent from a year ago, according to Bank of Tokyo-Mitsubishi Ltd. Sales rose 2.2 percent during the period in 2001.
Some retailers including Toys 'R' Us Inc count on the holiday shopping season for more than 40 percent of annual sales.
Last year, the day after Thanksgiving was the sixth-busiest shopping day.
Sales may be hurt by a short season. There are 26 shopping days between Thanksgiving and Christmas, fewer than last year's 32 days. The shortened season will likely reduce sales by 1.6, said Daniel Barry of Merrill Lynch & Co, who ranked as the top analyst covering department stores in Institutional Investor magazine's annual survey. Some investors have been selling shares of retailers because the shares have become too expensive relative to the companies' growth prospects.
George Foley, who helps manage US$14 billion at Glenmede Trust Co, said he sold his stake in Wal-Mart Stores Inc last week. The world's largest merchant trades at 31 times earnings forecasts.
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