Weekly Analysis of the Market

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During the week the market was exposed to a number of economic data points which ultimately helped drive equities marginally higher for the week. On Monday we received October consumer credit which came in better than expected at down $3.5 billion, compared to a revised -$8.8 billion in the prior period and better than forecast estimates of -$9.4 billion. While the head line number looks encouraging, implying consumer credit constrictions are easing, one needs to look at the breakdown between revolving and non-revolving.

The revolving debt revolving, which is the type of credit consumers use to buy everything but homes and autos, actually fell by $9.9 billion compared to -$10.1 billion in the prior period. It was the non-revolving debt that is used in buying homes and autos, which fell at -$4.9 billion compared to an increase of $0.2 billion in the prior period.

During Tuesday we received some sentiment surveys which was slightly lower than the prior period results, yet the markets improved nonetheless. On Wednesday the market received word that October wholesale inventories increased slightly by 0.3% after falling 0.8% in the prior month. Economists had expected inventories to decline by 0.5%. This news was seen as positive as market participants interpreted the increase as companies preparing for an expansion, regardless of whether the expansion is robust or mild.

While many investors were focused on U.S. economic data, the global financial markets received another shot to its confidence when S&P announced it had cut its outlook to Negative as the country’s public finances worsen. S&P, which had cut Spain from AAA to AA+ in January, indicated the country will experience a “more pronounced and persistent deterioration” ...

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...mber core YoY CPI is expected to come in at 1.8% compared to 1.7% in the prior month. While the CPI and Wednesday's PPI results are important as an early sign of price pressures, the market's attention will be focused on the November housing starts and building with the hope of getting a read as to the improvement in the housing market. Housing starts are expected to come in at 575k up from last month's 529k while the building permits, (housing leading indicator), is expected to come in at 570k from last month's 551k.

Thursday delivers the weekly employment numbers in addition to the Conference Board's index of economic leading indicators. Initial claims are expected to show weekly claims of 466k, slightly better than last week's 474k. Leading indicators, a forecast of economic actively over the next six months, is expected to jump to 0.7% from last month's 0.3%.

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