Friday’s Market Recap: Mastercard Reports Overall Decline In Consumer Holiday Spending

Markets reopened Friday with low volume that continued till close as the Dow Jones Industrial Average (^DJI) was up to 8,515 points, after gaining over 47 points. The Nasdaq (^IXIC) added a little over 5 points and closed at 1,530 points. While the S&P 500 (^GSPC) added almost 5 points and closed with 872, it seems that investor shrug off negative retail data this holiday season. Markets overseas were mixed with Japan’s Nikkei (^N225) up 1.63% and Britain’s FTSE 100 (^FTSE) down 0.93% to finish off the trading week.

Markets seemed to shake off poor retail data as Mastercard (MA) reported an overall decline in consumer spending during the holiday season. Consumers in general took a seat this holiday season, cutting back spending on despite heavy price cuts. Luxury sales saw a 35% decline YOY with e-commerce retail outlets seeing just a 2% decline from the 2007 holiday season. It also appears that consumers are realizing their purchasing power and putting off purchases till companies offer better deals. However, this poses a problem, as many retailers cannot cut any further due to margin pressure and even the threat of taking losses on some of their products. Consumer confidence must return as the housing market bottoms for us to see a rebound in the capital markets.

Thirty year fixed rate mortgages hit another low, now at 5.14% from last week where it was at 5.19%.  This drop in rates should continue as the markets slowly accept the liquidity provided, making mortgages more available to the American population. GMAC’s approval to become a bank holding company to access TARP funds is seen as a lifeline for GM as it struggles to stay afloat. This access to government funds can help it offer financing to customers at low rates, the worry now is that other industries do not follow suit asking the government for money.

Federal prosecutors continue to sift through books and make further inquiries on the Madoff case. The last week has brought attention to family ties to the SEC and various other relationships that would have allowed Madoff to get away with such a large ponzi scheme. Madoff is currently secluded to his New York City home as investigations continue.

Be sure to catch the recap on Monday as the markets finish their last trading days as 2008 winds down.

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