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December 26, 2007 > Wall Street eyes shopping trends

Wall Street eyes shopping trends

By Madlen Read, AP Business Writer

NEW YORK (AP), Dec 21 _ With Wall Street itching for an end-of-the-year surge but still somewhat nervous about consumer spending, Americans' shopping patterns in the last hours before Christmas could make or break a ``Santa Claus rally.''

It's possible last week's stock gains marked the start of the big advance typically seen in the last week of one year and the first week of the next. But with home prices still falling, and oil and food prices elevated, it's certainly not a given. Even less of a guarantee is whether the market can hold onto any gains made in the upcoming weeks if consumers' spending power weakens.

Usually the fourth quarter is a strong one for the market, partly because it's when people do the most shopping. But the Dow Jones industrial average _ unless it rises at least 445 points over the next five trading days _ will post its first fourth-quarter drop since 1997. Ending the year at Friday's level of 13,450.65 would bring the blue-chip index its widest fourth-quarter loss since 1987.

Last week, the Dow ended 0.83 percent higher, the Standard & Poor's 500 index finished up 1.12 percent, and the Nasdaq composite index rose 2.13 percent.

A Commerce Department report on Friday showing that November sales outpaced expectations helped lift stocks, along with a hefty profit gain at Research in Motion Ltd., the maker of the BlackBerry, and word that Merrill Lynch would get a $5 billion cash infusion from overseas.

However, last Friday's huge number of contract expirations may have distorted the market's performance. Moreover, the Commerce Department report indicated that inflation, even after stripping out food and energy costs, is accelerating and that Americans are saving less.

On Monday afternoon, ShopperTrak RCT Corp. releases sales data from the last Saturday before Christmas, or ``Super Saturday.'' The stock market will close early Monday at 1 p.m. EST for Christmas Eve and will remain closed Christmas Day.

On Wednesday, the International Council of Shopping Centers releases its weekly chain store sales index, and Thursday, the Conference Board releases its measure of December consumer confidence. Economists surveyed by Thomson Financial predict confidence dipped this month compared to November.

Industry data so far has shown weak spending patterns for December. ComScore Inc. said last week that online sales from Nov. 1 through Dec. 14 rose less than projected and by a smaller amount than last year, and brick-and-mortar stores have also reported sluggish sales.

Either consumers are truly cutting back their spending this season, or they are waiting until the very last minute to get the best prices on their holiday gifts.

Wall Street, clearly, is hoping for the latter scenario.

``It looks like people are waiting for sales, and the retailers know that,'' said Philip S. Dow, managing director of equity strategy at RBC Dain Rauscher in Minneapolis. ``Shopping more than ever is a national pastime in this country. My guess is it's not going to be great, but it's not going to be terrible either.''

As 2008 approaches, Wall Street is keeping a close eye on other parts of the economy, too, such as business spending, manufacturing and, of course, the housing market.

The Commerce Department is expected to report a gain Thursday in November durable goods orders.

On Friday, the Commerce Department reports on new home sales in November and the National Association of Realtors reports on last month's sales of existing homes. Both indicators are expected to be as weak, as they were in October.

``With the job market softening, real income growth collapsing, household savings diminishing, consumer confidence on the decline, and inflation accelerating, it would defy the laws of physics if consumer spending were to remain robust in the months ahead,'' wrote Bernard Baumohl, managing director of the Economic Outlook Group LLC, in a research note.

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