Take on the ticker
David Klein, senior vice president/financial consultant, RBC Dain Rauscher Inc., Vernon Hills
The Benazir Bhutto assassination negatively impacted the market. What do you see happening in the aftermath as turmoil in Pakistan continues?
"The market the day of the assassination, in general, reacted negatively and had a strong down day. However, volume was very light. So it was an impression of the sensitivity of the market. We also saw U.S. Treasury bonds had rallied and are rallying again (Friday), which is a flight to safety. Government bonds are safe and backed by the faith of the U.S. government. In times of doubt and fear, money goes into Treasury bonds because they're safer. On Friday, the markets went back up in the morning, so I don't think the turmoil in Pakistan will have a long-term impact."
The holidays have slowed down many things this week, including the market. Will the market hold steady now?
"A lot of people are away, so volume is extremely light. But what you are seeing now are many predictions and forecasts. People who are savvy should not be too swayed by predictions. For example. BusinessWeek surveyed six well-known market gurus. Of the six, who were asked where the (Dow) market will end a year from now, the predictions ranged from 12,500 to 16,000. That's a spread of about 30 percent. That's why I say, be careful when one reads too many of these predications. "
United Airlines has canceled hundreds of flights this week, mostly because of inclement weather. How will the weather this winter affect the airline industry and its stocks?
"We are not strong proponents of airline stocks. What we recognize as being strong this year have been energy, industrials, basic materials, technology and consumer staples. … But transportation is another issue, and only the rails have been better performers. Because of the rising price of oil, we don't recommend airline stock."
The holiday shopping season is coming to a close, but it's been lukewarm at best. The weather is keeping away the gift-card buyers and bargain hunters. What's your take on the shopping season?
"Sales have been missing slightly on the forecasts for this season. They are on track to do OK but slightly under expectations. Remember, the consumer has faced a lot of headwinds in recent months. Home prices are tumbling, oil prices are going up, and consumer goods are going up. What remains to be seen is the after-holiday sales in the stores and on the Internet, especially with the gift-card holders. A lot of gift cards, which have become more popular, aren't included in the numbers from the major stores. So the final tally remains to be seen. Also, the Internet sales aren't expected to match what they've done in recent years. For example, Target expects its same-store sales to be plus or minus 1 percent versus last December. That's steady, but not up to expectations. Costco and Amazon are expected to do well."
What's coming for next week? How will the New Year roll out?
"Strong economic news is expected to come out Thursday and Friday when many people return to work. Employment news for December should come out on Friday. Factory orders and the jobless claims are expected on Thursday. What will happen in 2008? The Federal Reserve is looking at growth to be better, at 1.8 percent to 2.5 percent. But many investment managers are taking a broader look. They see the second half as being stronger than the first half of the year. They expect the Feds will lower the interest rate by 50 basis points in the first half of the year."