Will Disappointing Black Friday Sales Impact December Trading?

black-friday-salesBlack Friday weekend wasn’t the record-setting shopping event economists were expecting.

U.S. shoppers spent 3% less than they did a year ago despite a slight increase in the number of people shopping. Total spending was an estimated $57.4 billion for the four-day period starting with Thanksgiving, down from $59.1 billion last year.

Economists expected a 3.9% year-over-year increase in Black Friday spending. The shortfall is being attributed to two things: deeper discounts than usual, and a shift to online spending. Cyber Monday was yesterday, and online sales were expected to reach record levels. Another 131 million Americans were expected to shop online on the first Monday after the holiday.

Despite the rise in online sales, the dip in spending at brick-and-mortar stores over the Black Friday shopping weekend is a bad sign for U.S. retailers. Some say it bodes poorly for the holiday shopping season ahead. The question is: will investors see it that way?

December is traditionally Wall Street’s best month. Since 1950, the S&P 500 and the Dow have each risen an average of 1.7% in the final month of the year. The Nasdaq performs even better, advancing an average of 2% in December since 1971.

Holiday sales are a major part of that traditional bump. December retail numbers won’t be out until January. But will the underwhelming Black Friday sales linger over the market like a black cloud this month?

It’s too early to tell. Stocks were down only slightly yesterday. And a lot will likely depend on how strong Cyber Monday sales turn out. But with stocks already close to all-time highs, a disappointing holiday shopping season could be all the fodder the bears need.

The good news is that a steep drop-off this month is unlikely. The worst December ever was in 2002, when the S&P declined 6%. No other month has a more shallow historical low.

Furthermore, stocks have risen in five consecutive Decembers – including during the recession year of 2008. Since the turn of the century, the S&P has only fallen three times in the month of December.

The long-term implications of the weaker Black Friday sales could be the larger concern. Dwindling retail sales would be viewed as a major hiccup in the U.S. economy’s ongoing recovery. With consumer spending accounting for roughly 70% of gross domestic product, an underwhelming holiday shopping season could have a profound impact on U.S. GDP.

These are high times on Wall Street. Stocks are having their best year since at least 2003. Record highs are being established on almost a weekly basis. Nothing has been able to slow this market. Perhaps a weak holiday shopping season would finally be the trigger that upsets the applecart.

Let’s hope last weekend wasn’t a sign of things to come.

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Published by Wyatt Investment Research at