Last week, stocks and exchange traded funds (ETFs) rose on indications of interest rate cuts, but this week’s job market and retail sales readings will be key in determining how the U.S. economy is really doing.  Madlen Read of the Associate Press reports that rate cuts can only go so far in boosting the economy. 

Investors need evidence that consumers are spending; and if they are, this could give the markets a lift.  Even with higher oil prices and falling home prices, the holiday sales have been decent.  Some are concerned that this is only because goods have been deeply discounted.  What could this mean for corporate profits?  Employment is also part of the consumer spending equation.  Without jobs, people won’t spend.

So watch for November sales figures from Wal-Mart (WMT) and Target (TGT) on Thursday.  On Friday, the Labor Department reports on unemployment and the consumer sentiment will be released.

Some retail ETFs and their year-to-date performance:

  • SPDR S&P Retail (XRT), down 12.7%
  • PowerShares Dynamic Retail (PMR), down 18.4%
  • Retail HOLDRs (RTH), down 2.4%

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.