Wall Street eyes bleak retail data, pick for top Treasury job

New York: The grim view on consumer spending could get worse this week as investors study a government report on retail sales and earnings from Wal-Mart Stores Inc, while waiting with bated breath for President-elect Barack Obama's pick for US Treasury secretary.

Additionally, a deadline for many clients to withdraw cash invested in hedge funds looms this week and could potentially continue to add to the selling pressure.

In the past week, investors were bombarded with further evidence of the deepening economic slowdown after most retailers posted the worst October same-store sales in 35 years.

More confirmation came on Friday when the Labor Department said the unemployment rate had reached 6.5 per cent, its highest level since March 1994.

This week's economic indicators include a government report on retail sales and weekly data on how many Americans are filing for jobless benefits.

"Anyone who doesn't expect [the economic data] to be bad has been living under a rock," said Elliot Spar, market strategist with Stifel Nicolaus & Co.

Looking forward

"From a market perspective, you just keep getting these numbers that are bad and the market is trying to look forward."

For the week, the Dow Jones industrial average fell 4.1 per cent, while the S&P 500 dropped 3.9 per cent and the Nasdaq sank 4.3 per cent.

US stocks experienced the biggest Election Day rally in history on Tuesday as investors savoured the end of uncertainty surrounding the presidential election, but stocks sold off the following day as economic concerns took centre stage again.

Investors will be taking some of their cues from the earnings outlooks of big name retailers Wal-Mart, JC Penney Co Inc and Kohl's Corp, although plummeting sales already signal that this will probably be the weakest holiday shopping season in decades.

One of the key events will be the selection of a new Treasury secretary under President-elect Barack Obama.

The Treasury post will be a critical Cabinet position in the Obama administration with financial markets still under stress and the economy hurtling towards what may be the deepest recession in decades.

Some of the names being considered for the post include former Treasury Secretary Lawrence Summers, former Federal Reserve Chairman Paul Volcker and Federal Reserve Bank of New York President Timothy Geithner.

"We need someone who has seen troubled markets and can sort their way through this mess and limit the damage to the real economy," said Lincoln Anderson, economist at LPL Financial in Boston.

In a Reuters poll, 26 of the 48 economists polled by Reuters picked Geithner for the top spot, while 14 others voted for Summers.

The market will likely rally on the appointment, analysts said, but then may immediately see another sell-off spurred by the looming November 15 deadline for hedge fund redemptions.

If hedge funds receive a slew of redemption requests this week, they may take advantage of the rally to raise capital, contributing to the volatility of the market.

"Between now and the 15th, that could have a limiting effect on how far the market could [rally]," said Richard Dickson, senior analyst at Lowry Research. "We could see new selling. [Hedge funds] are all crowded by the exit."