U.S. stock indexes edged higher Monday in a seesaw session that reflected investors' moves to revise their portfolios on the last day of November.
Some market observers were encouraged that equity indexes were not tanking in reaction to uncertainty whether United Arab Emirates central banks will bail out Dubai World from its debt problems, says S&P MarketScope.
Also Monday, the Chicago purchasing managers' index (PMI) rose to 56.1 in November, after climbing to a 13-month high at 54.2 in October, as the pace of expansion accelerated.
Meanwhile, U.S. holiday store sales appeared to come in below expectations in the first weekend of the season.
On Monday, the 30-stock Dow Jones industrial average rose 34.92 points, or 0.34%, to 10,344.84. The broad Standard & Poor's 500-stock index was up 4.14 points, or 0.38%, to 1,095.63. The tech-heavy Nasdaq composite index gained 6.16 points, or 0.29%, to 2,144.60.
Despite gains since March, major U.S. stock indexes are on track to close the decade lower for the first time in 90 years, notes S&P.
The market was bracing for Tuesday's reports on the November ISM manufacturing index, which was expected at 56.0, near the 55.7 reading the prior month; and October construction spending, whic is seen falling 0.8% after rising 0.8% the month before.
The week's data highlight is Friday's U.S. employment report, with nonfarm payrolls expected to fall by 125,000 while the unemployment rate holds at 10.2%.
Treasuries were mixed as stocks fluctuated. The U.S. dollar index was lower. Gold futures rose $5.10 to $1,179.30. Oil futures moved up $1.24 to $77.29.
"While the markets are a bit calmer today as fuller liquidity returns, trading conditions are still choppy and nervous with month-end factors also likely to influence trading," wrote Brown Brothers Harriman stragtegist Meg Browne in a note Monday.
The United Arab Emirates' central bank eased credit for lenders and said it "stands behind" the country's local and foreign banks as they face the prospect of rising losses from Dubai World's possible default. Dubai World, a state-owned holding company struggling with $59 billion of debt and other liabilities, said Nov. 25 it would seek a standstill agreement with creditors and an extension of loan maturities until at least May 30, 2010. Banks will be able to borrow money from the regulator for half a percentage point above the three-month local benchmark interest rate, the Abu Dhabi-based Central Bank of the UAE said in an e-mailed statement yesterday. "This is a timely pre-emptive move from the central bank," Ahmet Akarli, an economist at Goldman Sachs Group in London, said in a note. The central bank is "ensuring that local markets are operational" and banks "have access to ample liquidity."
Early Monday, investors seemed to believe that the crisis would be contained. The director general of the Dubai Department of Finance, Abdulrahman al-Saleh, said market reaction to Dubai World's announcement was exaggerated and did not match the extent of the company's woes. "I think banks are not at a stage where they need any extra liquidity from the central bank," he said on Dubai TV, Reuters reported from Dubai. "Creditors need to take part of the responsibility for their decision to lend to the companies. They think Dubai World is part of the government, which is not correct."
Dubai World's debt is not guaranteed by the government, al-Saleh also said. "The company received financing based on its project schedule, not a government guarantee," al-Saleh said in response to whether the government was backing the debt. "The lenders should be part of the responsibility."
Wall Street was also watching the retail sector as the holiday shopping season got underway. U.S. consumers spent significantly less per person at the start of the holiday season this weekend, dimming hopes for a retail comeback that would help propel the economy early in 2010. While shoppers turned out in force as early as U.S. Thanksgiving Day on Thursday, many said they had zeroed in on highly discounted items, would buy only what they needed and would walk out of a store if they did not find a good deal. "Shoppers proved this weekend that they were willing to open their wallets for a bargain," said National Retail Federation Chief Executive Tracy Mullin in a statement on Sunday. Retail chains "know they have their work cut out for them to keep people coming back through Christmas."
Store chains that may have done better than their peers include discount retailers like Wal-Mart (WMT) and Target (TGT), teen apparel retailers Aeropostale () and American Eagle Outfitters (AEO), and higher-end chains like Saks (SKS), analysts said. A clearer picture of retail performance will be seen when many U.S. retailers report November sales on Thursday.
Federal Reserve Chairman Ben Bernanke warned bluntly over the weekend that provisions in financial legislation before the House and Senate would "seriously impair" the Fed as it struggles to maintain financial and economic stability. In an article on the op-ed page of The Washington Post, Bernanke sharply criticized a Senate provision that he said "would strip the Fed of all its bank regulatory powers" and a House provision to repeal a 30-year-old law "to protect monetary policy from short-term political influence."
The Fed's jurisdiction to regulate banks has come under increasing attack in Congress in recent months, reflecting the anger of voters at the huge taxpayer costs of the bailout of Wall Street. Bernanke said that while some of the measures in response to the financial crisis were "distasteful and unfair," they were necessary.
In economic news Monday, the Chicago ISM manufacturing index rose to 56.1 in November, after climbing to a 13-month high at 54.2 in October, as the pace of expansion accelerated. The index compares to the 31.4 in March, the lowest since July 1980, and was at 33.6 a year ago. The employment component rose to 41.9 from 38.3 (33.4 last year). Even new orders extended gains, rising to 62.8 after surging 14 points to 61.4 in October (it was 29.2 last November). But prices paid also rose to 52.6 after slipping 3 points to 48.6 previously (54.1 a year ago).
U.K. GfK November consumer confidence unexpectedly fell to -17 from -13.
U.K. November Hometrack house prices rose 0.2%. The U.K. reported October new mortgage approvals of 57,000, while net lending rose by 900 million pounds.
Eurozone November harmonized index of consumer prices (HICP) was higher than expected at 0.6%, year-over-year, from -0.1% in October.