Blue-Chip Stocks May Hit Record By Year-End
Current quotes (delayed 20 mins.) INDEX:INX 1226.27 0 (0.00%)
INDEX:INX 1226.27 0 (0.00%)
By Jennifer Westhoven
NEW YORK (Reuters) - Blue-chip stocks could push into record territory this week, driven higher by positive economic data, the traditional "Santa Claus" rally, and temporary relief from gloomy corporate profit news.
But investors should be wary of weakness in the bond market and a fresh batch of corporate earnings warnings that could emerge in early January, market analysts said.
"We will see some economic numbers that could be interesting. They could fuel the market and perhaps send the Dow to a new record," said Sam Stovall, chief investment strategist for Standard & Poor's Industry Reports.
The Dow Jones industrial average closed Friday at 9,217.99, up 314 points for the week and about 150 points shy of its record 9,374.27 set in November. It was the sixth straight gain for the Dow, which has lagged two other major market gauges, the Nasdaq composite index and the Standard & Poor's 500 index. Both hit records Thursday.
Wall Street will eye housing and consumer confidence numbers Tuesday, Stovall said.
The housing market should keep on booming, economists polled by Reuters predict, with November existing home sales moving up to 4.81 million from 4.79 million. Consumer confidence should trickle down slightly to a reading of 125.6 in December, compared to 126.0 in November.
A traditional Santa Claus rally would bring the Dow within 20 points of its old high. The technical term, coined by market historian Yale Hirsch, refers to the rally late in the year and early in the new year.
"This is an amazing time we are living through," said Hirsch of the stock market's strong string of annual gains.
Barring a calamity next week, the Dow, the S&P 500 and Nasdaq are all poised to close 1998 with at least 10 percent gains, the fourth straight year of such increases.
"When I learned the ropes, we were always interested in what happened in the 1920s and here we are living in a time even better than that," said Hirsch. He said that did not suggest a repeat of the 1930s Depression. "There's not as much speculation now, and we have much better regulation."
On the earnings front, few companies are expected to issue profit warnings during the week between Christmas and New Year's.
Charles Hill, the director of research at First Call, which tracks profit forecasts, said that corporate earnings warnings and cuts in estimates by Wall Street analysts are likely to "slow to almost nothing over the holidays."
"But the negative pre-announcements will likely proceed at a furious pace the first few weeks of January," he said in a report.
But some analysts expressed worry that angst on the profit front could erode stocks this week. Other nagging worries were the Brazilian economy and the bond market, where prices have fallen in thin trading.
The 30-year Treasury yielded 5.22 percent Friday, up nearly a quarter point since a week earlier, the biggest rise since early November.
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