nov 24  welcome to the home for realtime coverage of markets brought to you by reuters reporters you can share your thoughts with us at marketsresearchthomsonreuterscom chris haverland global equity strategist at the wells fargo investment institute wfii is out with a note this week in which he talks about finding balance between cyclical and growth sectors haverland says that although wfii is forecasting aboveaverage economic and earnings growth through next year they expect the pace of growth to slow that said he argues that the environment has the potential to benefit both cyclical and growthoriented sectors suggesting a more balanced approach to the firms sector guidance therefore haverland highlights that wfii recently upgraded tech from neutral to favorable and downgraded energy from favorable to neutral regarding tech haverland says that even with above average valuations investors likely will continue to pay a premium for consistently growing highquality companies insulated from cyclical slowdowns as for energy although wfii expects higher oil prices in 2022 he sees it as prudent to take some profits given potential regulatory risks sensitivity to slowing global growth headwinds from green energy initiatives a strengthening dollar and relatively high leverage wfii now has favorable ratings on two growth and two cyclical sectors tech and communication services and financials and industrials although haverland believes the cycle is maturing he says it is too early to get defensive wfii maintains its most unfavorable guidance for consumer staples and utilities the us holiday shopping season is about to kickoff into high gear this week with the thanksgiving holiday on thursday followed by black friday  one of the busiest shopping days of the year and according to a goldman sachs gsn global investment research holiday survey of 1000 participants 58 of consumers said they plan to spend the same or more this holiday season compared to 46 last year this marks a notable return to normalized precovid trends as 59 of 2019 survey respondents expected to spend an equal or greater amount during the holidays however that comes with a caveat the majority of shoppers expect to be impacted by supply chain problems and as a result plan to shop earlier in the season that view was also echoed by nordstrom jwnn and gap gpsn whose shares slumped more than 20 on wednesday after they warned of product shortages during the crucial holiday season read more nevertheless the us consumer looks strong as evidenced by recent commerce department reports that showed retail sales and consumer spending surged in october despite high inflation read more  and with new covid19 restrictions imposed in europe ahead of the christmas season online spending is slated to be strong according to a refinitiv analysis so all eyes will be on amazoncom amzno read more the gs survey found consumers continue to prefer digital channels this year with 43 of them planning to spend more online this year compounded on top of 48 intending to spend more online last holiday season second helpings consumer spendingsentiment inflation new home sales etc 1230 est1730 gmt the economic data parade continues with mostly lofty reports wafting by like macys balloons so reload your plates and forget about leaving room for pie american consumers opened their wallets last month if somewhat begrudgingly see university of michigan below as their incomes crept higher consumer spending usgpcseci increased by 13 in october according to the commerce departments personal consumption expenditures report pce beating the 1 consensus and building on the previous months 06 gain read more meanwhile personal income usgpyeci also beat expectations increasing by a less robust 05 as we look forward to thanksgiving there is much to be thankful for in this fiscallystimulated recovery writes gregory daco chief us economist at oxford economics oe real consumer spending is now 42 above its precovid level while real disposable income is 24 higher taken together the saving rate edged down to 73 of disposable income returning to precovid levels while the saving rate is often seen as a barometer of consumer expectations  americans tend to stuff their piggy banks in times of economic uncertainty  the dipping rate could be partly due to expiring emergency benefits and rising inflation all wasn’t rosy for us households as they had to contend with higher inflation reduced product availability and diminished fiscal support daco adds adjusted for inflation real consumer outlays rose a more modest but still robust 07 with spending on services up 05 as long as were on the subject elsewhere in the pce report the core price index which strikes out volatile food and energy prices nailed expectations on the head rising 04 monthovermonth yearoveryear pce growth uspce2eci also hit a consensus bulls eye with its 41 print core pce is the us federal reserves preferred inflation yardstick and the number is closely watched as a potential harbinger of the central banks rate hike timeline the graphic below shows core pce along with other major indicators all of which continue to soar well above powell  cos average annual 2 inflation target sales of newly constructed us homes ushnseci increased by 04 in october to according to data from the commerce department the gain builds on the previous months downwardly revised 71 growth resulting in a lowerthanexpected 745000 units at a seasonally adjusted annualized rate saar read more still the increase jibes well with recent reports showing rebounds in building permits and homebuilder sentiment and fleshes out the narrative that the housing sector is finding a sturdier foundation after pandemicdriven demand spikes and supply scarcity pushed prices beyond the realm of affordability prices remain high but gradually rising inventories should limit further acceleration says rubeela farooqi chief us economist at high frequency economics fears of higher mortgage rates as the fed tapers should bring at least some buyers into the market speaking of the devil demand for home loans managed to increase last week despite an uptick in mortgage rates according to the mortgage bankers association mba applications for loans to buy homes usmgpieci and refinance existing loans usmgreci both crept higher by 47 and 04 respectively despite the average 30year fixed contract rate usmgeci gaining 4 basis points to 324 we expect home sales to continue to be constrained by limited inventory and the last year’s spike in prices which has eroded affordability for many prospective home buyers says nancy vanden houten lead economist at oxford economics the recent rise in mortgage rates which are up more than 25 basis points since the summer has also taken a toll on affordability at the margin its final take on november sentiment usumsfeci confirmed that the mood of consumers has soured dropping 43 points to 674 only slightly rosier than the advance take released earlier this month but as oes daco reminds us watch what consumers buy not what they say and the frustratingly untransitional inflation wave is largely to blame consumers expressed less optimism in the november 2021 survey than any other time in the past decade about prospects for their own finances as well as for the overall economy writes richard curtin chief economist of umichs surveys of consumers the decline was due to a combination of rapidly escalating inflation combined with the absence of federal policies that would effectively redress the inflationary damage to household budgets as seen in the graphic below consumer inflation expectations continue to run hot and the spiking yearoveryear pce price index  the feds pet inflation gauge  is confirming those fears wall street is taking its time to digest the data feast however as stands the three major indexes are modestly red the turkey indicator thanksgiving 2021 is gobbling up more green 1134 est1634 gmt as us consumers prep for the annual eatathon otherwise known as thanksgiving dinner theyre likely seeing notable differences compared with last years in some cases they may be lucky enough to see more guests around the table since around 196 million americans have been vaccinated for covid19 by now but with all this talk of inflation swirling live markets got curious about the price of laying on this years feast and it turns out that thanksgiving revelers will need to pay 14 more than last year with an even higher price increase for the center piece of the meal according to the american farm bureau federation while prices around the country will obviously vary hugely the national advocate for farmers and ranchers 36th annual survey using 218 price surveys from all 50 states and puerto rico gives some indication of the direction and this years survey represents the biggest price increase the bureau has seen in all 36 surveys with the next highest increase for the entire basket of food standing at 11 in 2011 this years shopping bill includes a 2399 price tag for a 16pound turkey or 150lb which is up an eye popping 24 from 2020 their estimated total bill of 5331 for 10 people also includes stuffing up 19 sweet potatoes up 4 rolls up 15 frozen peas up 6 cranberries up 11 and a vegetable tray coffee with milk and whipped creamadorned pumpkin pie adding other popular items like ham russet potatoes and frozen green beans would bump the price up to 6872 also 14 higher than 2020 the farm bureau says to be sure prices have come down since the bureau ran its price checks between oct 26 to nov 8 which was about 2 weeks before grocery chains started discounting with the price dropping to 107lb nov 511 and 088lb nov 1218 but according to the bureau the discounts came later this year meanwhile at wholefoodsmarketcom they were selling a 13999 ovenready turkey meal for 8 people at walmart the butterball frozen turkey cost about 098lb interestingly enough regardless of whatever investors hope to eat thursday they do seem to have less appetite for shares in turkey vendors in at least some cases shares in hormel foods hrln which sells turkeys as well as other foods last traded at 4303 compared with its closing price of 4687 on the day before thanksgiving 2020 nov 25 however another turkey vendor seaboard corp seba last traded at 394750 compared with its nov 25 2020 price of 329434 now thats some fancy gravy market participants were treated to a veritable buffet of indicators on thursday as economic reports caused a traffic jam on their way out of town in advance of the thanksgiving holiday so bountiful is this economic cornucopia this post has been carved in two so dig in first and foremost the number of us workings filling out firsttime claims for unemployment benefits usjobeci plunged by 26 last week to 199000 hitting the lowest level since 1969 read more consensus called for a much more modest drop to 260000 of potential concern initial claims are now actually a hair below the range typically associated with healthy labor market churn and is likely evidence of the ongoing labor drought as employers grow increasingly reticent to hand out pink slips workers remain in high demand in a labor market where payrolls and the civilian labor force remain well below prepandemic levels writes rubeela farooqi chief us economist at high frequency economics developments on the health front remain a risk that may weigh on labor supply but we expect workers to gradually return to the labor market as the cushion from savings diminishes supporting job growth over coming months ongoing claims usjobneci reported on a oneweek lag failed to meet analyst forecasts dipping to a stillelevated 2049 million for context the number of americans on unemployment for two weeks or longer could fill the city of austin texas twice over data on longlasting usmade merchandise usdgneci for the month of october disappointed new orders for durable goods  which include everything from toasters to fighter jets  unexpectedly dropped by 05 last month defying the modest 02 growth projected by economists digging deeper into the commerce departments report a 201 plunge in defense goods and a 145 drop in commercial aircraft pulled the headline number into negative territory while a 48 gain in autosparts and a 79 jump in communications equipment helped mitigate the decline core capital goods usndxaeci  which excludes aircraft and defense items and is considered a reliable proxy for us business spending intentions  rose 06 edging higher than consensus and building on septembers upwardly revised 13 growth read more the ongoing surge in core capital goods orders which are some 20 above their precovid trend and still rising rapidly  is a strong indication of faster productivity growth which will help offset rapid wage gains and thereby constrain inflation once the nearterm coviddriven surge abates says ian shepherdson chief economist at pantheon macroeconomics an advance reading on us goods trade and wholesale inventories for the month of october was also release by the commerce department the gap between the value of goods imported to the us and domestic goods exported overseas usgbaleci contracted 879 billion as rebounding foreign demand prompted a surge in exports the goods deficit contracted sharply in october on a historic month for exports writes mahir rasheed us economist at oxford economics oe while the latest data may signal a turning point as import growth moderated risks from the pandemic will continue to dictate trade flows heading into 2022 meanwhile the value of goods stored in the warehouses of us wholesalers usawineci increased by 22 last month building on septembers 14 growth this bodes well for the broader economy as private inventories had been a drag on gdp for four straight quarters until its modest contribution in q3 speaking of the devil the very busy commerce department also released its second stab at thirdquarter gdp usgdppeci revising it slightly higher to a 21 quarterly annualized rated coming in a hair below the 22 economist forecast the print confirmed an expected slowdown in economic recovery from the shortest and steepest contraction on record after experiencing one of the most severe economic shocks of the past century in 2020 the us economy has displayed one of the most rapid recoveries in modern history in 2021 says gregory daco chief us economist at oe still its not time to pop the champagne the next stage of the recovery will be trickier to navigate with an unresolved health situation and less fiscal support daco adds crucially the consumer spending component  which does the heavy lifting accounting for about 70 of the economy  was upwardly revised to 17 from 16 but as seen in the graphic below that gain was entirely thanks to spending on services with a decline in spending on durable goods echoing the monthly data wall street appeared to be saving its risk appetite all three major us indexes were lower in morning trading with tech splrct weighing heaviest on the benchmark sp 500 us stocks are lower in early wednesday trading with consumer discretionary leading sector declines in the sp 500 following some disappointing results from retailers including gap gpsn gap shares are down more than 22 in early trading while nordstrom jwnn is down more than 27 also following quarterly results the discretionary index is off about 06 early nordstrom said labor costs pinched its quarterly profit and warned of product shortages at its offprice stores heading into the holiday season bofa global research set a 4600 target for the sp 500 at yearend 2022 and compared this years market exuberance shown in retail trading mania and frenzied ipo activity to the market activity in 2000 in its us equity outlook note there are too many similarities between today and 19992000 to ignore wrote a group of strategists led by savita subramanian further noting that one out of four of the ipos of 1999 are todays blue chips the pt implies around 2 downside to sp 500s spx last closing price of 469070 as strategists said rising wage growth is one of the biggest headwinds for companies heading into the new year they add that the tina there is no alternative argument for equities would be less compelling if cash yields rival the current sp 500 dividend yield of 13 and if the 10year us treasury yield rises to 2 by 2022end as bofa rates strategists have predicted strategists prefer to stick with small caps and expect the group to outperform large caps at least in h1 2022 among sp sectors bofa is overweight energy spny and financials spsy that offer inflationprotected yield as well as healthcare spxhc and underweight communication services splrcl consumer staples splrcs and consumer discretionary splrcd heres a look at some of the top wall street analysts outlook for us stocks in 2022 the nasdaq composite ixic is only down around 18 from its nov 19 recordhigh close that said measures of internal strength continue to show broad and intensifying weakness read more for example the nasdaq daily advancedecline ad line topped on feb 9 of this year before ultimately collapsing to a 9month low in midaugust despite ixic new highs since then including just late last week this closely watched breadth measure remains well shy of its 2021 highs earlier this month it failed to reclaim its 200day moving average so far this year there have been 39 negative breadth days that is the composite closed higher but the ad line fell that day of note around 15 of those days have occurred in just the past 30 days or so suggesting recent internal tension also of those 39 negative breadth days 16 of them occurred with the composite registering a record close three of them have occurred in november with the last such day nov 19 or what is now the composites 1605744 record close just looking back to early 2020 periods of adline divergence vs the composite as well as nearby clusters of nasdaq recordhigh closesnegative breadth days did precede varying degrees of ixic instability additionally the ad line has now fallen sevenstraight days and is threatening its august trough a break below this level will put it at a more than oneyear low therefore unless the nasdaq can quickly catch its breadth risk remains for a much deeper decline from the recent peak read more for wednesdays live markets posts prior to 0900 est1400 gmt  click here read more terence gabriel is a reuters market analyst the views expressed are his own