Jobs report, retailers’ holiday sales may shake stocks

NEW YORK (MarketWatch) — After the stock market's strong gains in November, investors will focus next week on the government's jobs report and early reads on holiday shopping.

"It's a very busy week for data in general — what I would call a feast for the Fed in terms of the amount of data," said Kristina Hooper, a U.S. investment strategist for Allianz Global Investors.

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The Labor Department's report on November nonfarm payrolls will cap a data-heavy week on Friday. It's the last such report before the Federal Reserve's Dec. 17-18 policy-setting meeting. If the employment data are much stronger than expected, the Fed might decide at that meeting to scale back its $85 billion-a-month in bond buying that has boosted equities, according to Hooper.

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"I would say it's very unlikely, but this is our last big piece of data," she told MarketWatch.

Hooper said Allianz strategists, like most market watchers, anticipate a March tapering of the central bank's bond-buying program. For Friday's jobs report, economists polled by MarketWatch expect a rise of 180,000 payrolls, as the unemployment rate dips to 7.2% from 7.3% in October.

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In the preceding holiday-shortened week, stocks moved ahead slightly, finishing with solid gains for November. The S&P 500 (SPX)  rose 0.1% for the week, scoring a record close on Wednesday and achieving its eighth straight weekly gain. The benchmark index advanced 2.8% in November, leaving it up by 26.6% in 2013 to date.

The Dow Jones Industrial Average (DJIA)  rose 0.1% for the week, 3.5% for the month and scored a record close on Wednesday. The Nasdaq Composite (COMP)  gained 1.7% for the week and 3.6% for November, finishing above 4,000 on Tuesday for the first time since September 2000. Read more: Putting Nasdaq 4,000 in perspective.

Other notable economic releases for the coming week will include Markit's manufacturing gauges for China, Japan, Germany and France on Sunday night and early Monday, as well as the Institute for Supply Management's reading on U.S. manufacturing due at 10 a.m. Eastern time on Monday. In addition, the market will digest monthly auto sales reports on Tuesday, a third-quarter U.S. GDP estimate on Thursday and a consumer-sentiment reading on Friday.

Early reads on holiday shopping

Investors also will look for winners and losers in the retail sector following Black Friday, the official kickoff for the holiday shopping season, and Cyber Monday, a key day for online holiday shopping. What's expected? Most U.S. holiday shoppers plan to spend about the same as last year or more than last year, according to a Sterne Agee survey and a similar Deloitte poll.

"While it's hard to say where people will spend relative to their budget/plan, it is encouraging to see that most people intend to spend amounts comparable to last year," said Charles Grom, a Sterne Agee retail analyst, in a research report last week.

The reports on Black Friday included the typical tales of some brawling between bargain hunters, but also a little less activity than in prior years. Read more: For Wal-Mart, Amazon, it's open season in the hunt for online holiday shoppers.

Strategists sticking with stocks

With the main indexes near record levels, holding strong year-to-date gains, more market watchers have become skittish. See: Mom and pop fear stock bubble.

But market peaks come at maximum optimism, and while the investment community is upbeat, the "average citizen is very unhappy," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co., in a note last week. He said the divergence in moods means optimism isn't universal, and that's served the market well. "Until such time that consumer confidence matches the exuberance found on Wall Street, the long-term trend of the stock market is less likely to be challenged," Bittles wrote.

Allianz's Hooper said valuations are "stretched in general for U.S. stocks," but she likes dividend-paying cyclical stocks in areas such as technology and materials, along with European equities and certain emerging-market plays.

"What we're telling our clients is that if you have a long-term investment horizon, then you need to have exposure to risk assets," said Allianz's Hooper. "It's about being thoughtful and selective right now, looking for the opportunities in risk assets — and there are many." Check out: Buy domestic growth and small caps in 2014: Jefferies.