Wednesday, December 23, 2009

Santa's Coming; Equities Continue to Rally

There was a little less enthusiasm for stocks after the University of Michigan announced that consumer sentiment fell in December, to a reading of 72.5 from November's 73.4, and National Association of Realtors (NAR) reported that new home sales fell by 11.3% in November, to a seasonally-adjusted annual rate of 355,000 units. The drop from the same period a year ago was 9%, due to uncertainty over the new home buyer tax credit, which was extended by congress, but not in time to cause a slowdown as many buyers walked away from possible deals. Also adding to homebuilders' woes are the crush of foreclosure properties on the market, which are driving down real estate prices overall and provide a tempting alternative to purchasing a new home for tens of thousands of dollars more.

Builders have not recovered from the housing meltdown of the past three years running, with the number of new homes on the market down to levels not seen since 1971.

Those two bits of economic reality - released at 9:55 and 10:00 am, respectively - sent stocks backwards. The Dow went from its high of the day just moments after the open, to the low of the day shortly before 10:30 am, and traded in a narrow, 35 point range the remainder of the session.

All of the major indices recorded smallish gains, with the NASDAQ leading again and making new multi-month highs, as did the S&P 500.

Dow 10,466.44 1.51 (0.01%)
NASDAQ 2,269.64 16.97 (0.75%)
S&P 500 1,120.59 2.57 (0.23%)
NYSE Compos 7,217.20 33.02 (0.46%)

Trading was extremely light and listless, without much enthusiasm except on the NASDAQ, which continues to spark rallys. Advancing issues outpaced decliners handily, 4580-1913, and there were 679 new highs as compared to just 81 new lows, though you wouldn't expect those kinds of numbers given the tiny gains on the day. There's quite a bit of nibbling going on, mostly from day-traders and high-frequency types, but the market continues to grind forward on the expectation of a Santa Claus rally, usually defined as the final five trading days of the year, plus the first two of the following. That would put markets right on the cusp of one final push into the new year, despite stocks trading at elevated levels.

NYSE Volume 3,585,565,750
NASDAQ Volume 1,606,121,000

The dollar weakened today, taking a break from its month-long rise against the other currencies of the world, and, right on cue, commodities rallied. Oil, which was also boosted by a significant draw-down in US oil stock, rallied $2.27, to $76.67. Gold gained $7.80, to $1,094.50, temporarily breaking off its very own deep, recent slide. Silver added 15 cents to close at $17.18 per ounce.

Markets will be open only a half day on Thursday and closed Friday in observance of the holiday.

I'll be reporting sometime after 1:00 pm on the short session, wishing all a very Merry Christmas. It's been a remarkable year and my pleasure to report on it.

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