A Creeping Tide of Worry

10/25/2013 12:00 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

The closer we get to this year's holiday season, the more investors should pay attention to every single action retailers make, writes MoneyShow's Jim Jubak.

It's getting to look a lot like Christmas, in every analyst report you write, or read. I know it's only October, but we're starting to see a lot of guessing (since that's really all it is), about what the holiday retail season is going to look like. It's showing up in guidance for a lot of companies in third quarter earnings and it's really critical.

What we're trying to do here, what the market is trying to do as it rallies, is trying to walk this very fine edge, you can call the Goldilocks market, whatever-not too hot, not too cold. The market would like to see the economy cold enough, so that the Federal Reserve doesn't begin to taper off its purchase of assets from $85 billion down to something like 70 a month, until, maybe, March. But it doesn't want to see the economy fall off a cliff, because then that means the earnings are going to be bad.

So, Christmas is kind of critical. It's a big season for almost everybody, and what we're seeing is, something that's looking a little weaker than we might like, if we're looking for the perfect Goldilocks market.

What we've seen are companies, like Wal-mart, saying good things. Wal-mart is saying it was going to add about 10% more seasonal help than it did last year. That's a step in the right direction. On the other hand, Kohls, another big company in the retail space, said that it was going to keep hiring steady. Is Wal-mart an outlier? Is Walmart the trend? We don't know yet. That's one of the reasons we're watching this.

The other thing we're getting is stories from companies like eBay, where eBay said ,when it delivered third quarter earnings and talked about guidance for the fourth quarter, it said they were concerned about revenue in the fourth quarter. They were concerned that the holiday season was not gong to be as strong as they would like.

There is a sort of creeping tide of worry about retail, and consumer spending, and all that, for the fourth quarter and the end of the year period. We really need to watch that going forward if we want to try to judge how long this rally might run and whether it's going to stall on fundamentals.

This is Jim Jubak for the MoneyShow.com video network.

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