Wall Street Awaits Data on American Consumption

Another turbulent week is expected on Wall Street, where the key factors for market direction will be the report on consumption in the U.S., the business results of Wal-Mart, and the selection of a new Secretary of the Treasury in the future government of President Barack Obama.

The Dow Jones index fell 4.1 percent last week, to 8,943 points, while the S&P index lost 3.9 percent, diving to 930 points. The Nasdaq index, on the other hand, fell 4.3 percent, to 1,647 points. It is becoming increasingly evident that Americans are ‘tightening their belts.’ Last week, many retail chains reported a decline in sales, making October the worst month for consumption in the last 35 years. Therefore, this week, the official government report on retail trade for that month is eagerly awaited. Analysts expect a 1.2 percent decline in retail sales, the same as in September.

“Those who do not expect bad data must have been living underground in recent months. Bad data is expected in the market, but that will not surprise anyone; it is already factored into stock prices, and everyone is trying to look beyond the bad news, into the future,” says Elliot Spar, a strategist at Stifel Nicolaus. Additionally, the business results and further expectations will be announced by retail chains Wal-Mart, JC Penney, and Kohl’s Corp, although the decline in retail sales already indicates that the upcoming holiday spending will be among the weakest in recent decades. The selection of the Secretary of the Treasury in the future government of President Barack Obama is also eagerly anticipated.

This position will be one of the key roles in the future government. The new Secretary will have to tackle the issues pushing the world’s largest economy into the deepest recession in decades. Among the candidates for the new Secretary are well-known names such as former Treasury Secretary Lawrence Summers, former Fed Chairman Paul Volcker, and the current president of the New York Fed, Timothy Geithner. According to a Reuters poll, of the 48 economists surveyed, 26 voted for Geithner and 14 for Summers. Additionally, October 15 is the deadline by which hedge fund investors must report their withdrawal requests.

This will mean that funds will have to sell stocks to raise the cash needed to pay these investors. “Any rise in stock prices will be limited until that date if hedge funds find themselves under pressure from numerous requests from investors wanting to exit the market. After that, a calming of selling pressures can be expected,” says Richard Dickson, an analyst at Lowry Research. (Hina)