'Tis Season of Cheer:
Santa (Rally) Is Here,
At the End of the Year
By E.S. BROWNING
Staff Reporter of THE WALL STREET JOURNAL
The much-awaited Santa Claus rally seems to be on its way down the chimney.
For the second session in the past three, the Dow Jones Industrial Average rose more than 100 points, pushing above 10200 to its highest finish in more than 19 months.
Thursday's gain of 102.82 points, or 1.01%, to 10248.08, marked the blue chips' sixth session in a row above 10000 and their fifth gain in those six days. It was the first finish above 10200 since May of last year.
Stocks typically rise at year's end; the final few trading days of the year often are among the year's best, as investors look forward to January inflows of money into retirement accounts, pension funds and the like. Traders have dubbed this phenomenon the Santa Claus rally.
This year, that seasonal pattern was boosted by hopes for a strengthening economy, better corporate earnings and continuing low interest rates, as well as a more stable world. Thursday, a Federal Reserve report on business activity in the Philadelphia region was better than expected. Leading indicators were strong and new unemployment claims filed last week were the lowest in six weeks. (See related article.)
There were some clouds in the sky. The dollar fell to a record low against the euro, its fifth record low in a row. Oil rose to a nine-month high amid fears that winter demand would be heavy. Treasury bonds also rose. Gold, which has been hitting eight-year highs, fell a bit, however.
"I have clung to the idea that we were going to have a Santa Claus rally," said David Briggs, head of stock trading at Pittsburgh mutual-fund group Federated Investors. "There has been an underlying current of cash coming into the market. The economic numbers continue to reinforce it."
The week's gains have perhaps been exaggerated by Thursday's "quadruple witching" expiration of options and futures contracts. Some investors have bought stocks to cover options and futures positions. Some traders worry that stocks might temporarily pull back once that artificial stimulus disappears.
Thursday saw a resurgence in volatile technology stocks that had flagged after leading the gains for most of this year.
The broad S&P 500 rose 1.18%, or 12.70 points, to 1089.18, now up 24% on the year and at a 19-month high. The Dow is up 23% on the year.
But the Nasdaq Composite Index, heavy in tech stocks and up more than 46% on the year, isn't back to the recent high it hit Dec. 1. It rallied Thursday, though -- up 1.81%, or 34.85 points, to 1956.18.
Analysts are debating whether the tech stocks will lead the market next year, or give way to other groups.
"Until the end of November, the one consistent feature of the rally off of the March lows was the leadership by technology stocks," said Russ Koesterich, chief North American stock strategist at State Street Global Markets, an arm of Boston financial group State Street Corp. "Over the past several weeks, that leadership has been cracking." Transportation stocks, equipment makers and metals and mining stocks have taken the lead recently, he said. |
