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The first five trading days of December delivered a mixed result for the major stock indices with the Dow Jones Industrial Average ranking as the clear winner (up 1%), the S&P 500 essentially unchanged and the Nasdaq Composite Index down 1.1%. As with the prior week, one of the key drags on the Nasdaq has been Apple, Inc. (AAPL), whose shares dropped nearly 9% last week. That retreat deepens the drop from the 52-week high for Apple’s shares, based on last week’s closing price, to just over 24%. Despite Apple’s iPhone 5 going on sale in more than 50 additional countries during the last few weeks and soon being launched in China, AAPL shares have fallen victim to capital gains uncertainty. That uncertainty has prompted investors to exit the shares, despite, at least in my view, favorable growth prospects.

Apple is not alone in dealing with the capital gains uncertainty. Looking as far back as October, we can trace a number of pronounced downward moves in a number of high-flier stocks, including Google (GOOG), Disney (DIS) and AT&T (T). With only a few weeks to go, it’s possible that this situation could spread to other big gainers this year, particularly as investors look to comply with wash rules. Potential candidates could be PulteGroup (PHM) and other housing plays, Smith & Wesson (SWHC), Henry Schein (HSIC) and others, as investors look not only to book gains but to comply with wash-sale rules.

ISM Manufacturing and a Questionable November Employment Report

Generally speaking, domestic economic data was also mixed last week. While we once again had a fall in the unemployment rate, dipping to 7.7% in November from 8.3% in July, job creation remains well below 200,000 per month. Viewed from a different perspective, it’s the continued rise in the number of Americans that are not in the labor force that is driving down the unemployment rate. After all, if you’re not in the labor force, than you can’t be considered employed or unemployed. Sorry folks, that’s the way the government tabulates the data.

Looking at other employment-related reports, the Challenger Job Cuts report showed a significant upward move in November, reflecting a rise in layoff announcements from companies such as Boeing (BA), Perkin Elmer (PKI), Bristol-Myers (BMY), Corning (GLW), DuPont (DD), Newell Rubbermaid (NWL), Colgate-Palmolive (CL), Advanced Micro Devices (AMD), Texas Instruments (TXN) and Xerox (XRX), among others. Data from Gallup revealed a more disconcerting data point in November — the sharp drop in the U.S. Payroll to Population (P2P) employment rate, which fell to 43.7 for the month. As Gallup noted, “After remaining substantially above year-ago levels during the summer and early fall, the P2P plunged in November, falling below 2011 levels.”

The other pseudo eye opener was the ISM Manufacturing Index reading for November, which fell to 49.5 — below the expansion/contraction line of 50– surprising some, but not if you’ve been paying attention to a number of the regional Fed manufacturing reports. What I did find surprising below the ISM headline number was the drop in the orders component. Declining orders likely reflect concern about the “fiscal cliff,” as well as the continuing contraction in Europe.

Turning to the five trading days ahead of us, the number of economic reports continues to slow. Even so, there are a few noteworthy ones to watch this week. Dollar General (DG), Costco (COST), Joy Global (JOY) and VeriFone (PAY) are the earnings reports that I’ll be keeping tabs on this week. In terms of the economic calendar, retail sales, inflation and the manufacturing economy take the center stage toward the end of the week. Prior to those announcements, it’s likely to be a few days of non-events and I’m lumping the Federal Open Market Committee (FOMC) rate decision into that category. That situation means that for first few days of the trading week, “fiscal cliff” negotiations are poised to be in the spotlight following the Sunday morning talk show gabfest.

Launching PowerTalk — Behind the Scenes and in the Know

In a recent PowerTrend Brief, I mentioned that I would be launching a new service designed to close the information gap between institutional investors and you. That offering is PowerTalk — an in-depth conversation with chief executive officers (CEOs), chief operating officers (COOs) and other key business people at public and private companies, as well as other subject matter experts. Conversations with people such as these offer tremendous insights into how an industry or a company works, what the competitive dynamics are and where it is likely to head in the next few quarters and years.

Last week, I shared my PowerTalk conversation with Matt Jacobson of Acta Wireless in which we talked about mobile payments, mobile couponing and other aspects of mobile commerce. We also discussed the transition from cash and credit card to paying with mobile devices, such as GoogleWallet or the mobile carrier Isis Mobile, and how retailers such as Best Buy (BBY), Sears (SHLD), Target (TGT) and Walmart (WMT) are responding. To listen to that conversation, click here. With eBay’s (EBAY) PayPal, Square and even Starbucks (SBUX) reporting strong increases in mobile transactions, this PowerTalk could not be timelier.

Later this week, I’ll be talking with James Debney, president and CEO of firearm manufacturer Smith & Wesson (SWHC), a candidate for my Safety & Security PowerTrend. Be sure to give it a listen.

To keep up on the latest investment activities, check out Eagle Daily Investor, where my e-letter appears each week. To read my e-letter from last week, please click here.

Sincerely,

chris

Chris Versace
Editor, PowerTrend Brief

Here’s a more granular look at what investors should be watching and listening to during the next five trading days:

Monday, Dec. 10
IDT Corp. (IDT) 
Orchard Supply Hardware (OSH) 

Tuesday, Dec. 11
Trade Balance (October)
Casey’s General Stores (CASY)
Dollar General Corp. (DG)
The Pantry (PTRY)

Wednesday, Dec. 12 
MBA Mortgage Index (Weekly)
Export & Import Prices (November)
FOMC Rate Decision (December)
Treasury Budget (November)
Costco Wholesale Corp. (COST)
Joy Global (JOY)

Thursday, Dec. 13 
Initial & Continuing Jobless Claims (Weekly)
Retail Sales (November)
Producer Price Index (November)
Business Inventories (October)
Hovnanian Enterprises Inc. (HOV)
VeriFone Holdings (PAY)
Pier 1 Imports, Inc. (PIR)
Quicksilver Inc. (ZQK)

Friday, Dec. 14 
Consumer Price Index (November)
Industrial Production (November)
Capacity Utilization (November)
Rick’s Cabaret International (RICK)
Spartech Corp. (SEH)