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Friday, January 02, 2009
Week Ahead: Jobs, Car Sales, Retail Sales
Dunstan Prial
FOXBusiness
Jobs, cars and retail sales are sure to garner investors’ attention this week.
In addition, the new Congress, which will be sworn in Tuesday, could begin drafting an economic stimulus package worth hundreds of billions of dollars that President-elect Barack Obama hopes to sign when he takes office.
Investors will be looking for hints as to who might benefit and who might lose from the legislation.
Two prominent tech conferences are also being held next week and the markets will be watching for signs that technology makers believe 2009 may be better than 2008.
The U.S. auto industry is expected to close out the year with numbers reflective of one of the worst in the industry’s history.
December sales figures will be released on Monday and every auto maker is expected to post double-digit drops compared with a year earlier, according to Edmunds.com. Chrysler’s sales may show the biggest drop, with a 46% decline, followed by Nissan at 42% and General Motors (GM) at 39%.
The one bright spot: auto sales typically are stronger in December than November, and this year isn't expected to be an exception, according to Edmunds.com.
Annual sales are likely to come in at about 13 million units, an 18% drop from 2007.
On Tuesday, the Institute for Supply Management releases its December index of service-sector activity and the National Association of Realtors reports on November pending home sales, which reflect contracts signed to purchase used homes.
Major retailers are expected to report on Thursday that December same-store sales fell 1% during one of the weakest holiday shopping seasons ever, according to Thomson Reuters. Standard & Poor's is more pessimistic, predicting a 2.7% decline.
Excluding Wal-Mart Stores Inc. (WMT), the world's largest retailer, Thomson Reuters put the December sales drop at 6.2%. Only discount stores are likely to show a gain, of 0.8%.
The U.S. unemployment rate, to be released on Friday, is expected to have risen to 7% in December, the 12th month in a row that the country has lost jobs.
In November, U.S. non-farm payrolls contracted by 533,000 jobs, the largest decline since December 1974, and the unemployment rate was 6.7%, the highest since October 1993.
In earnings news, fertilizer maker Mosaic Co. (MOS) and seed and herbicide supplier Monsanto Co. (MON) could offer insight into the agriculture sector when they report quarterly results Monday and Wednesday, respectively.
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Some mutual funds want you to pay for the privilege of them (or your investment adviser) taking your money to invest. It's called a load, and it works like a cover charge to get into a nightclub. Luckily, there are such things as no-load funds. As the name implies, shares of these funds are sold without a fee paid to a broker or investment advisor.
The entire amount you invest in no-load funds goes to work for your returns. On the other hand, with load funds, right off the bat you're charged commission (not to mention other fees incurred over the life of the investment). Let's say, for example, you invest $25,000 into a load fund that charges a 5% commission. This costs you $1,250 off the top, bringing your actual investment down to only $23,750.
The often-cited horse race analogy argues against investing in load funds. Here's the logic behind it: Would you place a bet on a horse that had to start a race 200 yards behind the others? Well, maybe you would if you got a tip from a sketchy, trench coat-clad man in a dark alley. However, under most circumstances, it's not smart to put your money on that handicapped horse.
But some argue that at times that man in the trench coat (aka your broker) knows more about the horses than you do, and has a better shot at picking a winner. Also, sometimes these fees are unavoidable because some funds are available only through investment advisers.
Cost-benefit analysis can help determine when a load fund is worth it (in other words, when it will score you a load) and when it is better to "do it yourself" and avoid the fees. Load-fund fees range depending on share class and can cover a variety of costs, such as paper work and fund management.
