Investor Hopes Dim for Santa Claus Rally
After three straight years of declines, Wall Street needs a Santa Claus rally more than ever. Many investors say a traditional stock market rally that occurs just before Christmas and continues into the new year is not in the cards this year.
If that’s true, then beware the bear.
Santa Claus tends to visit Wall Street almost every year, bringing a short but respectable rally in the last five days of the year and the first two in January, said Jeffrey Hirsch of the Stock Trader’s Almanac.
The so-called Santa Claus rally has been good for an average 1.7% gain since 1969, or 1.5% since 1950.
Many investors, though, doubt such a rally will occur this year.
“I don’t think we’ll see a Santa Claus rally,” said Joseph Kalinowski, chief investment officer at Ehrenkrantz King Nussbaum Inc.
Last week, major indices eked out modest gains. The blue-chip Dow Jones industrial average rose 0.93% for the week, while the Standard & Poor’s 500 index climbed 0.72%. The Nasdaq composite index was up 0.1%.
Trading volume usually is anemic the last week of December, and this year it could be even lighter than normal due to the timing of the holidays. This year, Christmas and New Year’s Day fall on Wednesday, smack in the middle of the week.
As earnings season draws to a close and thoughts turn to taking off for the holidays, a potential war with Iraq is the wild card that could disrupt the low level of trading that typifies Wall Street this time of year.
Many will be paying close attention to events in the Middle East that could cause investors to suddenly lose confidence in the market.
Rising oil prices and the Iraqi situation could continue to weigh on stocks, analysts said.
Key U.S. economic indicators to be released this week include a final figure for the University of Michigan consumer sentiment index for December, which will come today.
Analysts also said they will be looking for any news from U.S. retailers, for whom the last week and weekend before Christmas can make or break them for December.
