Investors hope stocks can build on rally

updated 4:19 p.m. ET Nov. 30, 2008

NEW YORK - Wall Street will look to build on the strongest weekly performance for stocks since 1932 on Monday, with investors focused on how recession-minded shoppers fared at the malls and a raft of government data that could give a clearer picture of the economy.

So far, it appears consumers still opened their wallets and might have met analysts' gloomy projections for the kickoff of the holiday shopping season. Preliminary reports show that sales got off to a decent start on Black Friday, the day after Thanksgiving, traditionally one of the biggest shopping days of the year.

Investors will be watching reports from the nation's biggest stores, along with economic data such as November's payroll report, to determine how deeply the nation's economic downturn has cut into spending. A more complete sales picture of how the Thanksgiving weekend fared won't be known until Thursday, when the nation's retailers report November same-store sales, considered a key indicator of retailer's health.

"It looks like we may have talked ourselves into an overly gloomy outlook for this year's holiday sales," said Peter Cohan of Peter Cohan & Associates. "Many of those who fear they'll lose their jobs may decide to enjoy the holidays while they still can. Next year might not be as good."

Volume at the New York Stock Exchange and Nasdaq are expected to return to normal levels with traders returning to work after the holiday. Some give-back is expected after last week's big run, but investors might also build on those gains if they're able to get a positive reading on consumer spending and get past any negative economic reports.

Wall Street will also be skittish about financial stocks. Though last week's $20 billion government-backed rescue of Citigroup Inc. helped encourage buying in the sector, any sign that another major bank or financial company is in trouble would quickly unnerve investors.

Stocks ended a holiday-shortened week with some of the steepest gains in 75 years. Major indexes have locked in some big advances, including 16.9 percent for the Dow Jones industrial average and 19.1 percent for the Standard & Poor's 500 index, since the rally began Nov. 21.

It was the first time the Dow rose for five consecutive sessions since July 2007, and the biggest five-session percentage gain since Aug. 8, 1932. For the S&P 500, it was the first five-day string of gains since July 2007, and the largest five-day percentage gain since March 16, 1933.

"Stocks were overdue for a bounce," said Stephen Leeb, president of New York-based Leeb Capital Management. "Increasing evidence that the federal government will do whatever is necessary to stave off deflation and depression have helped fuel the advance, which started with news of Tim Geithner's nomination as the next Treasury Secretary and continued with the rescue of Citigroup."

Banks face Feb. 1 deadline on compensation The nation's biggest banks face a February deadline for submitting employee compensation plans to the Federal Reserve, according to people with knowledge of the process. Obama: Job losses expected to continue Consumer spending tumbles, incomes flat Economy grows at best pace in 2 years New jobless claims drop slightly

The rally helped to offset the devastating performance of major indexes in October, a month where $1 trillion of shareholder wealth was wiped out of the Dow Jones Wilshire 5000 composite index. That reflects the value of nearly all U.S. stocks.

Analysts expect the early part of this week will be dominated by retail sales reports, especially any data that zeroes in on how much Americans spent in the first days of the holiday shopping season.

The reason that sales data is so crucial to Wall Street is because consumer spending accounts for more than two-thirds of the U.S. economy. Even modest spending over the Thanksgiving weekend — anything that does not fall far below already dour forecasts — could give the markets a boost.

MORE FROM ECONOMY IN TURMOIL

Economy in Turmoil Section Front

Stimulus watch: Pay raise counted as saved job Banks face Feb. 1 deadline on compensation Obama: Job losses expected to continue Consumer spending tumbles, incomes flat Economy grows at best pace in 2 years New jobless claims drop slightly House panel OKs new rating agency rules New jobless claims climb more than expected Leading indicators point to growth in 2010 U.S. official: Impact of stimulus will level off Economy in Turmoil Section Front   Add Economy in Turmoil headlines to your news reader: