Markets Closed Up as The Santa Claus Rally Finally Arrives

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Markets Closed Up

Markets closed up as Santa finally arrived on Wall Street this past week, and it was certainly a nice and fitting finish to the holiday week. With a flourish of activity on the last day of trading before Christmas, we find that the Dow Jones Industrial Average is presently perched at a five-month high. And with ‘Comet’ and “Cupid’ bringing up the sleigh, the Standard & Poor’s 500 is now back in positive territory for 2011. Fortunately it was a lack of bad news, which helped boost stocks last week along with some short covering, but hey, when you’re in the holiday spirit, who’s complaining?

For the week, the Dow Jones Industrial Average jumped by 3.60%, to close at a level of 12,294.00. The broader Standard & Poor’s 500 leaped higher by 3.74%, and now stands at 1,218.64. Meanwhile the tech-laden Nasdaq Composite added 2.48%, but still finds itself mired in negative territory for the year. The small-cap stocks as represented by the Russell 2000 also got into the holiday, as it sprinted higher by 3.59% and continues to show strong momentum since the lows of October.As we approached the Christmas holiday investors were treated to another round of mostly good U.S. economic news and no lumps of coal. Home building appears to be on the mend, and even the jobs data is beginning to improve. With just four trading sessions left for 2011,it’s certainly been a year to forget performance-wise. However, with both the Dow and the S&P in the ‘green’ thus far, it shouldn’t feel like the year has been a complete loss. There have been plenty of worse years, with many within recent memory. Keep in mind that at one point in early October, the market was down nearly 20%, which is in line with the traditional bear-market definition. Intraday, the losses were even greater. And even as the year began well, despite a plethora of unsettling and just plain miserable news, we’re beginning to see some light at the end of the tunnel. Let’s not forget that in 2011 we had to deal with political revolutions in oil-producing countries, a tsunami in Japan and another bailout for the country of Greece. And let’s not forget the last minute congressional agreement on a two-month extension of the payroll-tax cur. As it now stands, the fundamentals are improving, and that is why more and more analysts are giving a ‘thumbs up’ to stocks for 2012. So let’s just be thankful for what the market has given us thus far this year, as meager as it may be!For the year-to-date statistics, the major equity indexes are still somewhat mixed to say the least. The Dow Jones Industrial Average leads the major indexes for the year as it’s up nearly 6.2%. The S&P 500 finally made it back into the black for the year, even though it’s registering a paltry 0.61% gain. Meanwhile, the Nasdaq Composite is still negative to the tune of 1.29% and the Russell 2000 is mired in red by 4.55%As 2011 draws to a close, the Treasury market continues to befuddle even the shrewdest of investors like Bill Gross and Dan Fuss. The consensus a year ago was that Treasury-bond yields had nowhere to go but up. Many were calling for the 10-year Treasury notes yield to climb to 3.40% which was widely off the mark to say the least. Investors continued to flock to the safety of U.S. Treasuries, driving yields down to record lows – such as 1.67% on the 10-year Treasury this past September. As it now stands, the benchmark Treasury note’s yield has continued to stay low and is presently just over 2%. That’s 130 basis points (1.3% percentage points) on the year. And ironically enough, yields fell the steepest after Standard & Poor’s stripped the United States of America of its triple-A rating, lowering it a notch to double-A-plus. In addition, we also have the Fed on record saying that it will hold its federal-funds-rate-target at extraordinarily low levels through mid-2013. For borrowers, this was certainly one of the best gifts of the Christmas holiday.


It’ll be another holiday-shortened week as we head into 2012, with most of the attention being focused on S&P/Case-Shiller index of housing prices which comes out this Tuesday. Look for the decline in housing prices to have slowed in October, as most pundits are forecasting a 2.8% fall year over year. Also on Tuesday we’ll have the consumer confidence report, which should show some improvement for the month of December. Wednesday we’ll get a report on U.S. mortgage applications, where it’s expected that average rates on 30-year fixed mortgages will have fallen to a new record low of 3.91%. Come Thursday, it’ll be the weekly jobless claims report, which should show that for the past two weeks, initial claims have fallen by approximately 38,000. Friday no doubt will be one of the slowest trading days of the year, as traders and investors get set to forget the lethargic 2011 year, and begin to set their sights on a better 2012.


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