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Post-Thanksgiving, Working Off "Inventory"

Zacks

Friday, November 25, 2016

We have a shortened trading session this Friday, the day after Thanksgiving. Markets will close at 1pm ET today, presumably so investors can have plenty of time to go shopping for Black Friday.

The retail shoppers’ traditional sales day to put their ledgers in the “black” for the first time of the year has had muted influence in recent years, with the onset of eCommerce companies like Amazon AMZN peeling off a significant amount of big-box retail foot traffic. Even still, we’re expecting strong Black Friday numbers from companies like Target TGT and Macy’s M. Even high-end retailers like Tiffany TIF get into the act with limited discounts this time of year.

Inventories are reportedly down this year compared to last, meaning retailers will have less stock to work off and therefore can plump their profits more easily. And following the Trump Rally (or Trump Rotation, as Zacks analyst Dave Bartosiak calls it), with index futures up again ahead of today’s opening bell, market participants may indeed believe in Santa Claus, or at least a “Santa Claus Rally.”

U.S. Trade Deficit numbers were released this morning, and a bit higher than expected at $62 billion. $56 billion was the last read, and $62B represents a number in the top half of all trade deficit reads this year (June was highest, at $64B). Again, inventories were down — 0.4% on both retail and wholesale sides. Consistent working-down of existing stockpiles; these are good things for growth looking forward.

We’ll see if this type of sentiment carries forth to next week’s OPEC meeting, which begins Monday and wraps on Wednesday. Inventory stockpiles have been keeping oil prices low for the past six quarters or more, and OPEC policies — especially in the face of increased tracking in the U.S. and Iran bringing its oil supply online — have had much to do with this. WTI and Brent oil prices had been inching up in recent weeks, anticipating a positive outcome from next week’s meeting. But both oil indices are down ahead of the bell today.

Mark Vickery
Senior Editor

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