Morning MoneyBeat: Waiting for That Santa Claus Rally
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MARKET SNAP: At 5:55 a.m. ET, S&P 500 futures down 0.1%. Treasury yields flat. Nymex up 12 cents at $97.56. Gold 0.7% lower at $1244.30. In Europe, FTSE 100 down 0.9%, DAX down 0.7% and CAC 40 down 0.3%. In Asia, Nikkei 225 down 1.1% and Hang Seng down 0.5%.
WATCH FOR: Weekly Jobless Claims (8:30 a.m. Eastern Time): seen 328K; previously 298K. November Import Prices (8:30): seen -0.5%; previously -0.7%. November Retail Sales (8:30): seen +0.6%; previously +0.4%. October Business Inventories (10:00): seen +0.3% previously +0.6%. Adobe Systems, Cienna, Comverse, Hovnanian, LululemonLULU -11.65%, Meta Financial GroupCASH +1.03%, Quiksilver, Restoration Hardware, Science Applications and Streamline HealthSTRM +0.47% Solutions are among companies scheduled to report quarterly results.
THE BREAKFAST BRIEFING
Say what you will about the stock market’s recent skid, investors have a very favorable tailwind at their backs heading into the final few weeks of the year.
The Congressional budget deal and its possible impact on the Federal Reserve’s taper timetable weighed on stocks Wednesday, as the Dow Jones Industrial Average fell 129 points, its biggest drop in a month. The blue-chip average has dropped in seven of the past nine trading sessions, falling 1.6% over that timeframe.
For now, the selloff isn’t causing much concern among market watchers. “This is more of a lack of buyers than any type of real panic,” Mark Newton, chief technical analyst at Greywolf Execution Partners, wrote to clients Wednesday afternoon.
Looking beyond the day-to-day gyrations, here are five trends, courtesy of WSJ Markets Data Group, that point to the December effect on stocks and the rally reaccelerating by the end of the year:
December Is the Best Month for Stocks: The Dow has risen in December 72% of the time throughout its history. It averages a 1.4% monthly gain, the best increase of all 12 months.
Don’t Fret About the Early December Weakness: The bulk of the December rally typically occurs in the final 10 trading days of a year, a trend that bodes well considering the Dow is down 1.5% this month. Historically the Dow is flat, on average, in the first two weeks of December. It then averages a 1.5% gain in the final 10 trading days of the month.
Yearly Highs Happen Most Often in December: There have been 36 times the Dow has hit its high of the year in December, more than twice the amount of the next highest month — January – which has had 16 highs in a given year.
Last-Day-of-the-Year Effect: The Dow has ended at a high on the final trading day of the year 11 times throughout its history. Ten of those 11 instances were record closes, with the most recent occurrence coming in 2003.
Santa Claus Is Good for Stocks: The Dow has risen in the five days before Christmas 65% of the time, including 10 of the past 12 years, averaging a 0.5% gain. The last five days of the year are typically even better for stocks: The Dow has risen 79% throughout this timeframe, averaging a 1.2% gain.
Of course the major caveat with all of this is past performance isn’t always a predictor of future performance. But with stocks looking wobbly at these lofty levels, the bulls should take solace in the seasonal tailwind and what the second half of December usually brings to the market.