Black Friday Gives Consumer and Market Sentiment a Boost

The all important post-Thanksgiving holiday shopping season began with mixed results last week. There were more shoppers on the prowl at malls and stores across the nation in search of deals; but they spent less on average than a year ago.

According to the National Retail Federation (NRF), 147 million Americans performed their economic duty by visiting stores on “black Friday”, the day after Thanksgiving. That’s a 4.8% increase in “traffic” from a year ago.

This is often the busiest day of the year for retailers with some opening in the wee hours of the morning to accommodate the onslaught of shoppers. It is said that retailers, after loosing money on average over the first ten-months of the year, can make it all back and go into “the black” (turning profitable) in the frenzied days after Thanksgiving.

Thrifty Shoppers Holding Out for Bargains

The bad news on black Friday was that the average “ticket” was lower than expected. In fact, shoppers spent 3.5% less than last year on their purchases. The mixed results so far seem to confirm industry forecasts of a rather lackluster holiday shopping season. The NRF for its part predicts the “slowest increase in sales in five years.”

Consumers are clearly cutting back on spending. With home prices falling more than 5% from their peak, oil prices sky-rocketing to $100 per barrel, and the average American household already drowning in debt... who can blame consumers for being thrifty?

However shares of beleaguered U.S. retailers got a boost in Friday’s shortened trading session amid relief that the post-Thanksgiving sales results weren’t even worse than expected. Wal-Mart shares rose nearly 2% Friday, while Target jumped almost 6% and Macy’s surged over 5% higher.

Stocks are Beginning to Offer Bargains Amid Global Correction

Retailers weren’t the only stocks to bounce on Friday. In fact, global stock markets have been undergoing a steady correction since October, as I pointed out in my previous blog (Are Global Stocks Heading for a Bear Market?).

The U.S. S&P 500 Index had declined nearly 9% prior to Friday’s bounce, while the MSCI Emerging Market Index had pulled back about 12% from its October peak.

Global markets look overdue for a relief rally of some kind. The character and strength of such a rally should reveal valuable clues about the market’s primary trend over the next several months.

More good news about the U.S. consumer should help sustain such a bounce, at least in the short run. More negative news on the health of the consumer; especially another housing-related market shock, and all bets are off.