Holiday Offers No Break from Thinking About Retail Sales, Rising Natural Gas Prices, Cheap GasolineI think Trump could trigger the start of a Santa Claus rally to save his presidency and boost his re-election chances as early as December 1 if he strikes a trade deal with China at the G-20 summit in Argentina.
The U.S. financial markets are closed for business on Thursday for the Thanksgiving holiday and there are no major earnings reports. This is likely to lead to a low volume directionless trade in the Forex markets. The banks in Japan are also on holiday, adding further to expectations of light trading and well-below average volatility.
However, even with the holiday, one can’t escape the markets. At some time during this short break you will be thinking about Black Friday retail sales, rising natural gas prices, cheap crude oil and gasoline and a possible Santa Claus rally.
Focus Will be on Retailers
Although U.S. trading will resume on Friday, volume and volatility are likely to be limited a second day, which is typical at the start of the more than month-long holiday season. Tomorrow is also Black Friday, which is a very important day for U.S. retailers. The name says it all. It’s called Black Friday because sales are often large enough to make a company profitable, or put a retailer “in the black” for the year.
Being “in the black” is very important this year to U.S. retailers. Just ask Sears, which is on the brink of bankruptcy. We all saw what happened in the U.S. stock markets on Tuesday. The Dow dropped over 500 points and turned negative for the year. Traders said one of the factors driving the blue chip average lower was an earnings miss by U.S. retailer Target.
Target shares fell 10.5 percent after reporting weaker-than-expected earnings for the previous quarter. The company also posted lighter-than-forecast same-store sales, which is a key metric for retailers.
The Target news spread across the U.S. Retail sector rather quickly sending the SPDR S&P Retail ETF (XRT) down 3.4 percent. Other retailers like Kohl’s, L Brands and Macy’s also fell 9.2 percent, 17.7 percent and 3.4 percent, respectively.
So if you’re looking for the next event that could make or break the stock market into the end of the year, watch the Black Friday sales results.
Record Cold Could Limit Retail Sales in the East
If you live in the northern U.S. especially on the East Coast then your choice will be to shop or stay indoors. If you choose to shop then you’ll be helping the economy. If you choose to stay at home then you’ll be enjoying the heat created by expensive natural gas.
Heating costs are expected to rise sharply this winter because natural gas inventories are well below their one-year and five-year averages. Furthermore, winter has arrived weeks earlier this year, putting supply issues at the forefront.
On Wednesday, the U.S. Energy Information Administration announced a 134 billion cubic feet draw during the week-ending November 16. This was well above the highest estimate at 121 billion cubic feet. The five-year average draw during this same period is 25 billion cubic feet. So it’s been cold and it’s going to continue to be cold over the Thanksgiving break with several areas in the Northeast hitting record lows.
Cheap Gasoline May Make Driving to Grandmother’s House an Option
If you choose not to take advantage of Black Friday sales or enjoy your expensive natural gas heat then you can take a long ride to your grandmother’s house for Thanksgiving dinner and leftovers. This may be viable option to flying because gasoline prices are cheap in the U.S. at this time, thanks to excessive crude oil production from the United States, Saudi Arabia and Russia. And of course, President Trump, who may have duped the Saudis and Russians into overproducing while granting exemptions from the Iranian sanctions to eight major customers of the rogue nation.
Gas up and drive as much as you want for the next two weeks because OPEC and its friends are expected to announce crude oil production cuts for next year in an effort to rebalance the markets. The decision to cut 1 to 1.4 million barrels from the market is expected to be made at the OPEC meeting in Vienna on December 6.
Will There Be a Santa Claus Rally in the Stock Market?
I have not eliminated a Santa Claus Rally in the stock market just yet. Given the results of the mid-term elections, President Trump’s approval numbers, the threat of impeachment, the Mueller investigation and warnings about a recession, I think Trump could trigger the start of a Santa Claus rally to save his presidency and boost his re-election chances as early as December 1 if he strikes a trade deal with China at the G-20 summit in Argentina.