Shoppers Rejoice
What a difference a couple of weeks make. This week alone, the market swung higher over seven hundred points giving everyone hopes that maybe we’ll finish the year on a strong note. There were several large developments including Black Friday numbers, steps being taken in Europe and the unemployment rate. We’re far from being out of the woods, but we’re thankful for the seemingly good news and buoyant optimism this week.
It seems that Black Friday and Cyber Monday surpassed expectations. We never doubted the resolve of the American consumer to pull out the plastic this time of year. Retail sales over the Thanksgiving weekend jumped 16.4% to a record $52.4 billion. The number of consumers who visited stores or Internet shopping sites increased 6.6% to 226 million, also a record. Cyber Monday sales increased a staggering 18% from a year earlier. Some have pointed out that the increase in sales has come at the expense of profit margin with promotions, sales and free shipping being big draws for consumers this year. Either way, retailers are keeping their fingers crossed that the momentum will be sustained.
In other news, it appears Italy might have been on the brink of insolvency earlier this week. In order to finance their debt they needed to raise additional capital at ever higher interest rates. An Italian bond auction on three-year paper rose to a euro-era record 7.89% from 4.93% just one month ago. Equally disturbing, Eurozone banks borrowed $11.6 billion from the European Central Bank (ECB) overnight, the highest amount since March, characterizing the inability of nearly all EU banks to obtain financing in the markets. One trader was quoted as saying, “Just look at my screen. I have one big European bank willing to lend and 40 banks wanting to borrow.” The crisis in Europe is far from over.
There is a lot to be concerned with these days, but one bright spot this week was the unemployment number. Much to the surprise of both analysts and economists alike, the unemployment rate dropped from 9.0% to 8.6%. Now this is a preliminary number and it will likely change in the next two months, but we’re hopeful that this marks the beginning of renewed hiring in the United States. I’d be remiss if I didn’t mention that not all of that gain is from new hires. Part of that number includes the 315,000 people who dropped out of the labor force which caused the participation rate to fall. But we’d like to focus on the positive this week.
And finally, you know I look far and wide for interesting stories to close out each week. Sometimes they are based on financial news, but more often than not they are simply amusing and noteworthy. This week I came across one that had me laughing. By now, many of you are aware of Groupon, the discount aggregator. Well, a London baker is steamed at the daily discounter after customers flooded her shop after issuing a daily deal. Rachel Brown offered a seventy-five percent discount on a dozen cupcakes. With twelve cupcakes normally costing $40, her bakery was swarmed. More than 8,500 people signed up for the deal, which cost them just $10. Mrs. Brown was forced to bake 102,000 cupcakes which necessitated her hiring extra workers and resulted in the loss of $3 per batch. She ended up losing nearly $20,000 on the deal. The moral of the story: Be careful what you ask for!
December 2, 2011: Market Update
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