Stocks woke up on the wrong side of the Thanksgiving leftovers on Monday as stronger data on U.S. manufacturing were outweighed by weaker economic updates overseas as well as a lackluster start to the holiday shopping season.
Seems there was just not enough oomph in the gravy to motivate shoppers to leave their warm homes and hit the malls, as Black Friday sales slumped materially from last year. The National Retail Federation numbers suggest that spending over the past weekend is expected to be down 11% from last year. It’s not just the promotional pricing, either; shopper traffic also declined. That being said, the weekend’s results are not considered very predictive of the entire shopping season. The NRF still expects a +4.1% increase in holiday sales, and ShopperTrak has maintained its +3.8% forecast.
The ISM Manufacturing data released in the morning tried to get investors amped up, but the information was not enough to counter weak results abroad. In the United States, manufacturing companies reported new orders up while current production fell slightly. Some respondents were concerned with the threat of a strike by dockworkers and related slowdowns.
Over in China, the official manufacturing PMI for November was below consensus and fell from the prior month to an eight-month low. Many believe that the weaker data will put more pressure on the People’s Bank of China to ease monetary policy further.
On the other side of the globe, the eurozone manufacturing PMI disappointed by falling to its lowest level since June 2013 and just barely above contraction. Germany, France and Italy are now all in contraction already. A sub-index for new orders offered little hope for improvement, coming in at 48.7, below 50 for the third consecutive month and at a 19-month low. The U.K. remains a bright spot, as its manufacturing PMI beat expectations and rose from the prior month to its highest level in four months.
Of course, the good news is that this is the kind of bleak report that should help spur the European Central Bank to take action with more aggressive quantitative easing.
As for the U.S. market, stocks have been ripping higher at an unsustainable, near-vertical rate since the Oct. 15 low was set amid extreme fear over Ebola and the potential for earlier than expected interest-rate hikes. That deep funk of risk aversion set the stage for the tremendous rally that has since ensued.
While prices have risen dramatically, and my subscribers have taken ample advantage along the way, investors are still not complacent enough to suggest that a major top is in place. I expect investors to come in and take advantage of Monday’s sell-off quite soon, and recommend that you retain a positive posture toward equities. Here’s one stock pick to get you started.
Acxiom Corporation (ACXM) is a $1.5 billion provider of enterprise data, analytics and software to marketing companies. It’s one of those companies that knows everything about you, and helps retailers figure out how to find you to make offers online and offline.
Shares were pummeled from May to October, but bulls have come back right on cue because this tends to be a great time of year for the shares. On one hand, I hate the invasion of privacy that companies like Acxiom represent, but on the other — well, if you can’t beat them…
Buy ACXM for target $20.45, and set a protective stop at $17.90, good till canceled.
Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.
