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Ahead of Wall Street

Monday, December 23, 2013

Favorable consumer spending data and boost from Apple’s (AAPL - Analyst Report) China deal should help sustain the market’s positive momentum in today’s session. Stocks were up strongly last week on a delayed seasonal bump, with the Fed announcement pushing stocks towards closing an impressive year in style. Volumes typically thin out in these final sessions, but the overall sentiment should remain positive.  

This morning’s positive consumer spending report builds on the recent run of favorable economic data. The positive revision to the Q3 consumer spending data in Friday’s final look at the GDP report showed the improving trend coming into the final quarter of the year. The ‘headline’ Q3 GDP growth had a big inventories component, reversal of which is expected to keep Q4 GDP growth at roughly half of that quarter's growth pace. But improvements on the spending front, along the lines of this morning’s reading, will be the more important metric than any pullback in the current quarter’s ‘headline’ GDP growth.   

On deck for release a little later today is the final look at the University of Michigan Consumer Sentiment survey for December, which is expected to show a modest gain from the preliminary December read a few weeks back, but materially up from the shutdown-induced weakness the month before. This key measure of consumers' mood will end the year below the July high, but has nevertheless showed notable momentum this holiday month.

The only useful economic data coming out the rest of this holiday-shortened week is coming out Tuesday when the November Durable Goods and New Home sales numbers come out. The expectation is for some loss of momentum in the home sales numbers tomorrow, but that is largely relative to the blowout numbers the month before. Inventories remain low and the overall trend continues to remain favorable.   

In corporate news, Apple has finally struck a deal with China Mobile that will make iPhones available to China Mobile’s more than 700 million subscribers early next year. The long-awaited deal had been in the works for years, with the sticking point being details like pricing gand revenue sharing. We don’t know those as to how those issues got resolved in the final deal, but this nevertheless provides the iPhone maker a better platform for competing effectively with Samsung and others in the Chinese market. In other news, Facebook (FB - Analyst Report) shares start trading as part of the S&P 500 index today.

Sheraz Mian
Director of Research

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