Stocks Fail to Maintain Gains

An afternoon selling spree diminished gains on all major indices as stocks spent Thursday searching for direction. The absence of any negative news, which has been a recent staple, helped the indices to a positive open which was maintained through most of the session.

Dow 13,056.72 +12.76; NASDAQ 2,602.68 -6.95; S&P 500 1,447.16 0.00; NYSE Composite 9,656.00 +8.50

After 2:30, however, buyers became scarce and stocks began to plunge. All of the indices went into the red after 3:00, and while the Composite and Dow managed small gains, the NASDAQ finished in the red for the second straight day of 2008. The S&P finished unchanged, a rare occurrence.

Once again, the price of crude oil was front and center on the radar of many traders. Price topped out at a nickel over $100 before retreating with a loss of 44 cents on the day, to $99.18. The implications for the general market with oil over $100 range from disgusting to dire. While some analysts believe that oil will reach the mark and maintain it for some time due to emerging economies in Eastern Europe and South America, others believe that gas prices over $3.25 cause many US drivers to significantly alter their driving habits.

In the larger scheme, many industrial type businesses rely on oil to meet energy demands and the higher price will either be passed along to consumers or negatively affect profits. Neither condition is particularly appealing, and both will hurt major corporations short term. Until the price of oil pulls back significantly from the $100 or surpasses it and stays, stock markets are likely to remain jittery with a negative bias.

Since the world needs energy at every juncture and oil is the main source, the ramifications of higher prices for crude are easily understood. For now, and for the past six months, oil has acted as an anchor on stocks.

Elsewhere, rumors from the employment sector remained positive in advance of the December jobs report, due out Friday morning at 8:30. As the report goes, so should the market. Analysts are expecting less than 100,000 new jobs created for December, and that mark could easily be met.

Traders will note that the number of new jobs created in December will likely fall short of the 150,000 necessary just to keep pace with the expanding workforce population. It looks like a mixed bag, though bears will be sure to point out the negative. And who can blame them? The overall economic condition is somewhere between poor and horrible. There's little reason to believe that companies are in a big hurry to expand their workforces.

On the day, the usual themes applied. Declining issues remained ahead of advancers, 3474-2877. New lows remained well ahead of new highs and actually expanded their lead, 575-124. Unless some succor can be seized from the jobs data, the first three days of January are going to be undeniably among the worst on record. In glossary terms, the January Effect of investors shedding stocks in the final days of a year before repurchasing them in the first days of January, seems to be almost forgotten this time around.

More interesting to watch is the performance of the S&P 500, to see if the January barometer will be in play throughout the year. The barometer is fairly reliable, showing an 89% correlation since 1970. If the S&P is up in January (don't hold your breath), there's a nearly 90% likelihood that the year will be a positive one for stock investors. This held true in both 2006 and 2007, but, with the index already off 21 points in 2008, this year may be an uphill climb.

NYSE Volume 3,408,176,750
NASDAQ Volume 1,970,244,250