US markets are seen heading higher on opening, with investors anticipating some good retail sales data for November thanks in part to a huge jump in car sales.
Jasper Lawler, market analyst at CMC, is calling on the S&P 500 to open eight points higher at 2,034, with the Dow ahead 59 points at 17,592. Tech-heavy Nasdaq is seen gaining 15 points to 4,239.
Lawler notes that US retail sales are expected to improve by 0.3% in November, with retail sales, excluding vehicles, forecast to move higher by 0.2%.
He explains: “Low interest rates and the drop in petrol prices have encouraged US consumers to take out car loans at the highest pace since 2001 with gas-guzzling SUVs as the top pick.
“The more meagre increase in core retail sales will not be helped by reports that Black Friday sales were disappointing compared to last year.”
Investors will also be eyeing weekly initial jobless claims data and import prices for November. Reuters notes that initial claims are expected to show a reading of 295,000 (versus 297,000 last week), while import prices are forecast to decline by 1.8%
The three sets of data may influence investor expectations about the timing for a rate hike by the Fed. Lawler believes the sharp fall in oil prices in combination with an imminent rise in interest rates from the Fed (as signposted by the latest employment report) presents a real risk to the high-yield credit market.
The large number of energy firms that have been levering up in the shale boom are particularly badly exposed, he says.
Lawler adds: “The auto market and shale gas industry are two of many areas of the US economy that may been fuelled into excessive risk-taking thanks to zero-bound interest rates from the Fed. When the markets go into a period of correction, investors start to look around at where the first domino could fall if interest rates were closer to historical norms.”
On the corporate front, Reuters notes that in pre-market trading Staples jumped 11.4% to $16.50, while Office Depot rose 9.9% to $7.39 after activist investor Starboard Value LP disclosed stakes in both office-supply retailers in a move that could set up a potential merger.