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Another year is winding down, and any investors who had their heads under a rock for the last 12 months might be surprised to hear how eventful 2011 has been. After all, with just five lightly-traded sessions left before 2012, the S&P 500 is virtually flat for the year.
Best Buy shares slipped 0.4%. The electronics retailer, already grappling with stiff competition from e-commerce sites like Amazon, had to announce an embarrassing inventory miscalculation that resulted in the cancellation of certain orders “hot” items made online the weekend after Thanksgiving. (See "Best Buy Skids On Black Friday.")
The news came Thursday, before a report Friday morning that showed weaker consumer spending and incomes than anticipated for November. The Commerce Department said personal incomes and personal consumption expenditures each inched up just 0.1% last month.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, acknowledged that the numbers were lean in November, but said Q4 consumption is still likely to be up 2.5%, the best measure in a year. Still, Shepherdson writes, “In order to see stronger numbers, payroll gains have to accelerate, and we are hopeful that the plunge in jobless claims signals exactly that.” Meanwhile, Thursday’s agreement in Washington to extend the payroll tax break for two months pushes off a sudden drop in spending and incomes that could have come in January, at least temporarily.
The major indexes opened higher Friday morning, but it is a challenge to draw many conclusions from this week’s rally given that volumes have been light ahead of a dead holiday week ahead. The Dow Jones industrial average was up 36 points to 12,205, and the Nasdaq 7 points to 2,607. The S&P 500, which needs to close above 1,257 a week from now to finish 2011 in the black, was trading at 1,258, up 4 points shortly after the open.
Durable goods orders were up 3.8% in November, with virtually all of the gain coming in transportation. The measure includes figures like aircraft orders; AMR, the bankrupt parent of American Airlines, won permission this week to move forward on its recent deal to buy new planes from Boeing.
Among other stocks in the news, Yahoo! took a break from a recent surge, sparked by reports the company is considering a cash-rich split that would include unloading its Asian assets to Alibaba and Softbank. Shares were flat in early trading.
On the other side of things, Mead Johnson Nutrition was falling for a second consecutive session, down 3.8% early after Wal-Mart pulled a batch of the company’s Enfamil baby formula from shelves in a cautionary move after the death of a newborn, though there was no immediately known link to the product.
The U.S. bond market shutters early for the holiday Friday, but there was some early action in the debt markets across the pond. Italian 10-year bonds – an auction of which is scheduled for next week – saw yields pop back over the key 7% mark, to 7.077%. The move comes in a week where the European Central Bank said it shelled out €489 billion in three-year loans to 523 banks earlier this week, setting off a rally in stocks that lifted beaten-down shares of firms like Societe Generale, BNP Paribas and Deutsche Bank.