MarketView for November 30

Summary 

It was another down day on Wall Street as news late in the session that Portugal's debt could be downgraded reignited selling in a high-volume flurry that may bode ill when markets reopen. Earlier, the S&P 500 erased much of a 1 percent loss after improved consumer confidence and manufacturing data pointed to a continually improving economy.

Adding to the near-constant stream of unsettling news from Europe, Standard & Poor's put Portugal's credit rating on review for a possible downgrade just minutes before markets closed, stating that the country may have to turn to the EU and IMF for funding. With Europe engaged in ad hoc crisis management for much of the year, the concern is whether or not the region's troubles will spiral out of control.

Financial and technology stocks ranked among the day’s biggest losers. Bank of America was down 3.2 percent to close at $10.95, while Micron Tech fell 4 percent to close at $7.27.

Consumer discretionary stocks were among the better performers after the Conference Board reported that consumer confidence rose to its highest level in five months. Improved consumer sentiment, as well as increased Midwest business activity has increased optimism on the Street prior to Friday's November unemployment report. Meanwhile, the Gap rose 3.1 percent to close at $21.36. At the same time, Tiffany saw its share price close up 2.4 percent at $62.10.

Economic Data Continues To Improve

Consumer confidence rose in November to its highest point in five months and Midwest business activity grew faster than expected, providing further evidence of economic recovery. However, at the same time a faster-than-expected drop in prices of single-family homes in September made no secret of the obstacles that still stand in the way of the recovery.

Tuesday's reports were the latest to suggest improvement in the economy, and the government's monthly employment report on Friday is forecast to show another month of job gains. In another encouraging sign, chain stores' sales and traffic over the thanksgiving holiday period indicated that the holiday shopping season has begun in earnest.

The Conference Board said its index of consumer attitudes increased to 54.1 in November, the strongest since June, from a revised 49.9 in October. Separately, the Institute for Supply Management-Chicago's business barometer rose to 62.5 in November, up from 60.6 in October and above expectations.

Friday's jobs report is also expected to show unemployment remaining at 9.6 percent, a rate that has fueled worries about the consumer's ability to spend and has helped prompt action by the Federal Reserve. Earlier this month, the Fed announced plans to boost growth through increased asset purchases.

Fed policymakers, in minutes released last week, said they saw unemployment at significantly higher levels than they had in their last forecast in June. Another top concern for policymakers has been the struggling housing market, and a report Tuesday gave further signs of weakness in that sector.

Standard & Poor's/Case-Shiller composite index showed home prices in 20 metropolitan areas declined 0.8 percent in September from August on a seasonally adjusted basis. Prices rose 0.6 percent from a year earlier, S&P said, but that was slower than the expected gain of 1.1 percent.

The economy is coming back from its worst downturn since the 1930s, but growth has been slow, with gross domestic product expanding at an annualized rate of 2.5 percent in the third quarter.

Retailers, meanwhile, have been mostly optimistic about holiday spending and profit forecasts. On Tuesday, Lowe's reiterated its sales and profit outlook for its current fiscal year 2010, and its share price increased 1.7 percent to $22.75.