MarketView for November 26

Summary 

The financial markets were a let down again on Monday, pulling back from last week's gains, as retailers fell on concerns about heavy discounts at the start of the U.S. holiday shopping season and the overhang of the "fiscal cliff" kept investors wary of making big bets. Nonetheless, The Nasdaq outperformed to close higher, led by gains in eBay and Apple.

The Standard & Poor's 500 cut most of its losses during the session and managed to stay above the psychologically important 1,400 level. It also remained above the 200-day moving average, maintaining its long-term uptrend.

The S&P 500 consumer discretionary index fell 0.5 percent after the start of the holiday shopping season over the four-day Thanksgiving weekend. Target fell 2.6 percent.

Among the most successful of the day’s performers were the shares of eBay, which closed at their highest point in almost eight years, rising 4.9 percent to $51.40, as the online marketplace notched strong sales on "Cyber Monday." Amazon gained 1.6 percent to close at $243.62.

The White House threw cold water on a proposal of avoiding the looming "fiscal cliff" of spending cuts and tax highs by limiting tax deductions and loopholes, instead of allowing tax rates to rise for the richest Americans. At the same time, the Street is hoping for advances in talks over the $600 billion in spending cuts and tax hikes scheduled to begin next year, which in turn threaten to drag the economy back into recession.

Indications of progress in talks, or just political willingness to negotiate, contributed to the market's recent rally. Major indexes last week gained 3 to 4 percent, with the Dow above 13,000 and the S&P above 1,400 for the first time since November 6.Those gains represented a turnaround from recent losses founded on worries about Washington's ability to solve budgetary problems.

In the other major worry for the market, euro zone finance ministers and the International Monetary Fund made their third attempt in as many weeks to agree on releasing emergency aid for Greece, with policymakers saying a write-down of Greek debt is off the table for now.

Shares of Knight were up 13.3 percent to $2.82 following reports that rivals might be preparing to bid for part or all of the trading firm.

Apple has asked a federal court to add six more products to its patent infringement lawsuit against Samsung Electronics, including the Samsung Galaxy Note II, in the latest move in an ongoing legal war between the two companies. Apple shares were up 3.2 percent at $589.53.

Was It a Mirage?

Once again the Street is taking a dim view of supposedly massive lines at stores over the four-day Thanksgiving weekend and is focused on concerns that any strength at the traditional kickoff of the holiday shopping season will be fleeting, sending many retailers' shares down on Monday.

So was Black Friday a mirage? The National Retail Federation said sales for the four days from Thanksgiving to Sunday rose 12.8 percent from the same period last year, well above the 4.1 percent gain the trade group expects for the whole season.

Still, the S&P 500 Retail Index .SPXRT closed down 0.22 percent, in line with the broader market, weakened in part by concerns about the euro zone and negotiations in Washington to avoid the U.S. "fiscal cliff," which could lead to higher taxes in 2013. Investors were concerned that strong sales initially might just mean less business later in the season.

Investors will give more weight to November sales data given that major chains such as Macy's, Target and Costco plan to report this week.

The Street is expecting an average increase of 3.3 percent in sales at stores open at least a year for November, excluding drugstores, according to Thomson Reuters I/B/E/S. Before the weekend, they expected a gain of 3.1 percent. However, even that data is only a small snapshot of only 17 chains. Many of the largest retailers, including Wal-Mart, Toys R Us, Amazon.com and Best Buy, the largest electronics specialty retailer, do not report monthly sales figures.

And you need to exercise caution against reading too much into one weekend's numbers, especially since four of the five busiest shopping days of the season will come in the 10 days leading up to Christmas Day, according to ShopperTrak.

Nonetheless, the Thanksgiving weekend typically accounts for 16 percent to 19 percent of total holiday sales,.

Still, sales over Thanksgiving weekend and the holidays in general are closely watched as consumer spending accounts for about 70 percent of all economic activity. Retailers can generate a third of their sales and up to half of their annual profit in November and December.

Meanwhile, it appears that Wal-Mart was once again the overall Black Friday winner with strong sales of electronics and Furby toys.

Still, the shares of Wal-Mart and Macy's were among the retail stocks that fell on Monday, despite a good weekend, because those stocks act as proxies for the overall economy. The shares of Coach, Ann, and Target were also down.

However, one of the worst-performing retail stocks on Monday was Aeropostale, whose shares closed 4.7 percent lower after it was downgraded in part because of increased competition from Abercrombie & Fitch and American Eagle Outfitters. Aeropostale was offering deeper discounts over the weekend than its two main rivals.

Another stand-out was Deckers Outdoor, whose shares rose 6.6 percent. Wedbush Securities raised its price target on Deckers, saying cooler weather over the weekend helped sales of its UGG boots. The shares were also buoyed by a media report discussing the company as a possible takeover target. However, such speculation is premature.