NEW YORK – Stocks could take off next week as investors get their first read on the holiday shopping season.
And Friday's November jobs report may signal whether the Federal Reserve will end its rate hikes soon, analysts said.
After five straight weeks of gains, the three major U.S. stock indexes are set to extend the rally into December.
"Consumers may or may not have cut back on retail spending, given the high cost of energy," said Tim Ghriskey, chief investment officer of Solaris Asset Management.
U.S. oil futures prices have slid from a late August peak. But they're still high enough that winter heating and driving costs are a concern to consumers -- and retailers.
Investors will cope with a blizzard of U.S. economic data in the coming week. Home sales, consumer confidence, retail sales, GDP, the Federal Reserve's Beige Book, personal income and spending, the Institute for Supply Management's manufacturing index, and November jobs are on the calendar.
Any inflation signs in Friday's November employment data may cast doubt on whether the Fed will stop raising interest rates during the first quarter of 2006.
This time of year, consumer confidence and retail sales will merit special attention.
"We'll get reports starting on Monday about how today went and they're often considered indicative of the season," Ghriskey said Friday, as shoppers poured into the stores.
The Friday after Thanksgiving, called "Black Friday," is considered the start of the holiday shopping season when stores lure customers with extreme bargains. Retailers hope "Black Friday" sales will be strong enough to ensure they make a profit for the quarter and the year.
Both the S&P 500 and the Nasdaq closed at fresh 4-1/2-year highs on Friday, while the Dow ended at its highest since March.
For November, the Dow is up 4.7 percent, while the S&P 500 is up 5.1 percent, and the Nasdaq is up 6.7 percent.
For the year to date, the Dow is up 1.4 percent, the S&P 500 is up 4.7 percent, and the Nasdaq is up 4 percent.
Wal-Mart Stores Inc. (WMT), the world's largest retailer, will report preliminary November sales data Saturday.
Weekly store sales are due Tuesday, while November chain-store sales are expected Thursday. Existing U.S. home sales are due Monday, with new home sales Tuesday.
But the Conference Board's November consumer confidence number, set for release Tuesday, may be the most eagerly awaited indicator of this holiday season.
"This is basically going to be telling us what kind of momentum we have going into the holiday season," said Anthony Chan, managing director of JP Morgan Asset Management.
Recent declines in gasoline prices and other positive economic indicators led the National Retail Federation to raise its retail sales forecast this past week to a gain of 6 percent over last year, up from an earlier forecast for a 5 percent increase.
With retailers competing to give consumers deep discounts on holiday gift items, analysts are wondering whether strong sales will be enough to make them profitable.
"To drive the 5 (percent) to 6 percent sales growth that people are estimating, it's going to come at the expense of margins and the question is: 'To what extent?"' said Peter Boockvar, equity strategist at Miller, Tabak & Co.
Looking at the luxury spending sector, jewelry retailer Tiffany & Co. Inc. (TIF) is due to report third-quarter earnings next week.
Stocks often go up in December in the time-honored year-end rally. But any sign of inflation could keep the Fed raising rates and derail the market's gains, analysts said.
"Historically, the fourth quarter is very strong ... and you take a little bit of a pause the week after Thanksgiving," Chan said. "But I think the data will be supportive enough that you'll be able to counteract those seasonal movements. I don't see any land mines out there."
The forecast calls for November U.S. non-farm payrolls, due Friday, to add 210,000 jobs, according to economists surveyed by Reuters. In October, 56,000 jobs were created.
Average hourly wages, deemed an inflation indicator, are expected to rise 0.2 percent in November, according to the Reuters poll. In October, average hourly wages gained 0.5 percent.
The Federal Reserve's Nov. 1 minutes hinted that the central bank was considering an exit strategy from the cycle of interest-rate increases that began on June 30, 2004. Its fed funds rate for overnight bank loans now stands at 4 percent.
But Jeffrey Lacker, president of the Federal Reserve Bank of Richmond and a voting member of the Fed's rate-setting committee, said it was still too early to call when the Fed's tightening campaign would end.
Any softness in Thursday's retail sales or Friday's payrolls would back the idea that the Fed will stop raising the fed funds rate when it gets to 4.5 percent, and that could push stocks higher, Boockvar said.
"The market is more sensitive now to the economic data than it's been in a long time because of this debate about the Fed being almost done," Boockvar said.