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 The "Santa Claus rally" is a seasonal anomaly that describes a rise
in stock prices in December, generally over the final week of
trading before the new year.
The benchmark S&P 500's average gain during the last five days of
December and the first two of January has been about 1.5 percent
since 1950, according to the Stock Trader's Almanac. The equities
market has gone up in December about 80 percent of the time for the
past 20 years.
Although the S&P 500 is up just about 1 percent so far this month,
the index is up about 27 percent for the year and is on track for
its biggest gain since 1997. The Dow is up about 24 percent and the
Nasdaq is up almost 36 percent for the year.
"It's been a strong year, and I wouldn't be surprised if investors
closed out their year today," said Doug Foreman, co-chief investment
officer of Kayne Anderson Rudnick Investment Management in Los
Angeles, in an interview late last week.
"There isn't much room or news to move higher from here until next
year."
Stocks rallied sharply last week, with the Dow and the S&P 500
closing at records on Friday, following the Fed's mid-week
announcement it will reduce its $85 billion in monthly bond
purchases by $10 billion in January.
For the week, the Dow gained 3 percent, the S&P 500 rose 2.4
percent, and the Nasdaq climbed 2.6 percent.
Trading volume last week was also below average as many investors
had already locked in their gains for the year ahead of the
holidays.
"There's a lot of transparency in the market, but most of the noise
has already been made. We should expect to continue seeing light
volume and not much selling as we go into next week," said Mark
Martiak, senior wealth strategist at Premier Wealth/First Allied
Securities in New York.
"We're selling our winners and looking to see what sectors could be
the ones to be in next year. I like cyclical and industrials. I want
to see the news post-holiday season before I start to recommend
defensive names."
With Christmas and New Year's holidays in the middle of the week,
trading volume is likely to be lower than in previous years. The New
York Stock Exchange will close early at 1 p.m. EST (1800 GMT) on
Tuesday and will remain closed on Wednesday for Christmas Day.
Trading will resume on Thursday.
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BACK TO BASICS
Analysts say this week will be the start of investors finally
shifting focus to the fundamentals, like economic reports and
earnings.
"With the Fed out of the way now, the market is going to move back
to making more rational decisions and focus on what really matters
in the economy," said Scott Clemons, chief investment strategist at
Brown Brothers Harriman Wealth Management in New York.
"Fourth-quarter earnings will start coming in January, and the
market's full focus will be on those numbers and outlooks."
Apple Inc <AAPL.O> will be in focus after the company announced on
Sunday a multiyear deal with China Mobile <CHL.N> to bring its
iPhone product lines to China, starting in January. Terms of the
deal were not disclosed.
Economic data this week includes personal income and consumption at
8:30 a.m. EST (1330 GMT) on Monday. At 9:55 a.m. EST on Monday, the
Thomson Reuters/University of Michigan's final reading on consumer
sentiment for December will be released.
Tuesday's data includes durable goods orders at 8:30 a.m. EST and
new home sales at 10 a.m. EST. On Thursday, weekly initial jobless
claims will be released at 8:30 a.m. EST.
(Questions or comments on this
column can be emailed to:
angela.moon@thomsonreuters.com) (Additional reporting by Ryan Vlastelica
and Chuck Mikolajczak; editing by Nick Zieminski and Jan Paschal)
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