NEW YORK—Stocks closed last Friday higher in a light session, with the gains pushing the S&P 500 Index positive for the year.
Boosted by the proverbial Santa Claus Rally on Wall Street, the Dow Jones Industrial Average gained 124 points, or 1 percent, on Friday. The broader S&P 500 gained 0.9 percent, while the Nasdaq Composite index climbed 0.7 percent. Only 2.2 billion shares traded hands, which is around half of the normal volume.
Markets are closed on Monday in observance of the Christmas holiday, which fell on Sunday this year.
Positive economic data in the United States in the second half of last week, helped by a resolution in Congress to extend payroll tax cuts, buoyed the stock market.
Government data released last Friday showed that November consumer spending was marginally higher—at a gain of 0.1 percent—for a fifth consecutive month. Retailers and department stores saw record store traffic last month, an important indicator as consumer spending drives two-thirds of the U.S. gross domestic product (GDP).
The report also showed that consumers’ disposable spending remained unchanged from the prior month, albeit the savings rate fell from 5 percent to 3.5 percent, reflecting increased spending during the holiday season.
While the U.S. unemployment rate officially fell to 8.6 percent in November from 9 percent in October, the real employment picture may be less rosy. The Department of Labor reported 120,000 new jobs, but analysts say that a few reasons for the decrease in unemployment include seasonal jobs and people giving up looking for work.
The S&P 500 index ended the week 0.6 percent higher on the year, with the Dow also in positive territory.
The performance of U.S. markets is a stark contrast to overseas markets. Since Jan. 1, the Euro Stoxx 50 has dropped 18 percent, mainly due to continued concern brought about by the European sovereign debt crisis. Japan’s Nikkei 225 index also slid 18 percent during the same period, with the massive earthquake and tsunami earlier in the year dampening the economic mood on the island nation.
This week, analysts expect continued light trading activity. In addition, some institutional investors and funds may sell shares ahead of year-end for tax reasons, which could send stocks lower.
Todd Salamone, VP of Research at Schaeffer’s Investment Research, observed that only 23 percent of stock-fund managers are outperforming the S&P 500 Index this year.
He speculated: “Do they take their chances, and hope stocks decline in the final week of 2011? Or, do they take steps to ensure they participate in the event that a year-end rally materializes?”
