shoppers tipped to push us shares up

Shoppers tipped to push US shares north
Monday, November 07, 2005

US stocks could edge higher this week on hopes for strong holiday spending after retailers' October sales were healthier than expected.

Crude oil prices at US$60 (HK$468) a barrel, though, could spoil the mood on Wall Street.

Some market strategists see stocks struggling for direction, with most earnings reports out of the way and little on the economic agenda likely to move the market this week.

"It's going to come down to how sales are pre-Christmas, what we hear from the retail sector," said Marc Pado, a market strategist for Cantor Fitzgerald. "I would expect next week, while remaining positive, to have not as robust a move as we saw this week."

With the Fed's November rate increase behind them, investors may be able to relax a bit, strategists said. The Federal Reserve's policy-makers raised the Fed funds rate for the 12th consecutive time on Tuesday, bringing the benchmark rate up to 4 percent, and hinted more rate increases could come.

US retail chains reported stronger- than-expected October sales Thursday, indicating that the holiday shopping period will be robust and boosting the Standard & Poor's retail index by 1 percent during the day.

"I believe we're in rally mode, and that between now and the end of the year is when we'll make most of our gains," said Joseph Kalinowski, president and chief investment officer at JSK Capital Partners in Southampton, New York.

Still, stubbornly high oil prices ahead of the US winter have scared investors that consumers will cut back on holiday purchases because of increased costs to heat their homes and businesses. US crude oil futures ended at US$60.58 Friday.

"There was a lot of hope that we would see a break in oil," said Stephen Massocca, head of trading and president of Pacific Growth Equities, a San Francisco-based investment bank.

Interest-rate-sensitive shares such as homebuilders fell Friday after the government reported that hourly wages rose 0.5 percent in October - the strongest pace of growth since February 2003. Analysts said the number could be seen by the Fed's policy-makers as increasing the threat of inflation.

At Friday's close, the Dow Jones US Home Construction Index was down 0.4 percent. This week's economic calendar is light, with most of the action Thursday, when the US international trade deficit, import prices and the University of Michigan consumer sentiment survey are due.

"Without earnings, without any Federal Reserve noise, without economic indicators that really move the needle, you're into more of a technical impact next week," said Bill Sutherland, director of equity research at Boenning & Scattergood.

"People may be looking at things being a little bit overbought, especially after the rally we've had in Nasdaq [last] week."

The pace may slow Friday, which is Veterans' Day. Companies reporting results next week include El Paso Corp, one of North America's biggest independent natural gas producers; Cisco Systems, No 1 maker of Internet equipment; Dell, No 1 personal computer maker, and News Corp.

The Philadelphia Stock Exchange semiconductor index ended last week about 6 percent higher. Evan Olsen, head of equity trading at Stephens in Little Rock, Arkansas, said: "We're seeing money rotating into the growth stocks. If I had to guess, I think people are pretty positive on the market."

REUTERS