Year Expected to Close on a High, as Usual
Bad economic data? Rising oil prices? Mediocre earnings? It’s the holiday season -- all is forgiven.
Wall Street is going into the last week of 2004 with all three major indexes above or at their multiyear highs. Immense investor confidence has buoyed stocks through bad news, and good news is greeted with enthusiasm. Still, as 2005 and fourth-quarter earnings approach -- and with stocks becoming ever more costly -- Wall Street’s impressive rally might become harder to sustain.
When will the ride end? Analysts are divided, with some saying the rally could continue through at least the end of the first quarter and others saying the fourth-quarter earnings season, which starts the second week of January, could include enough disappointments to create at least a small sell-off.
There is always the chance that world events, such as a terrorist attack, could prematurely end any rally, and problems with the upcoming elections in Iraq could cause stocks to fall. However, the markets have been resilient to geopolitical news in recent months.
For example, Tuesday’s attack on an American base in Iraq, which killed 22 soldiers and workers, would have caused stocks to drop quickly earlier in the year but had no effect on the markets last week.
For the week ahead, at least, investors can expect the market to climb, if history is any indication. Analysts say the week between Christmas and New Year’s Day has historically been one of the market’s best.
Since 1972, the Dow has gained an average of 0.99% in the five sessions between the two holidays.
Last week the “Santa Claus” rally delivered strong gains on Wall Street despite mediocre earnings and economic news, with the Dow Jones industrial average reaching 3 1/2 -year highs for three straight sessions.
The Standard & Poor’s 500 also set new 3 1/2 -year highs Wednesday and Thursday. For the week, the Dow rose 1.66%, the S&P; gained 1.33% and Nasdaq climbed 1.19%.
From Associated Press
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This Week’s Datebook
Today
* Preliminary numbers on holiday retail sales expected from some shopping centers and credit card companies.
Tuesday
* National Assn. of Realtors reports on existing-home sales for November.
Wednesday
* Conference Board issues its consumer confidence index for December.
Thursday
* Labor Department issues a report on weekly jobless claims.
* Freddie Mac reports on mortgage rates.
Friday
* New Year’s Eve. Government offices and many non-retail businesses are closed, but U.S. stock markets are open for a full session.
