Will Santa's Rally Be Naughty Or Nice?
AP
Stocks head into December with a tailwind, but the late November rally will quickly be put to the test by some gloomy economic reports and the next phase of efforts to save the struggling U.S. auto industry.
Traders say December couldn't be any worse than the preceding three months where steep declines have left stocks at seriously depressed levels, and they are betting now that December will deliver a rally. A multi-day rally in the past week, the first of note since April, gave the market a boost of confidence.
"There's a lot of people talking about a 20, 30 percent move up in stocks," said Kevin Ferry of Cronus Futures Management. (By Wednesday, the S&P 500 had gained 18 percent in four days and the Dow was up 15.5 percent - its best four day streak since August, 1932.)
December, on average, has been the best performing month for the Dow since 1915. It has averaged gains of 1.4 percent, according to Cleve Rueckert of Birinyi Associates. But Rueckert points out: "We've been careful about making historical comparisons because there really aren't any good ones," he said.
But Birinyi Associates, in a note, points out that you have to look back to 1937 to see a market performing in a pattern as dismal as this stock market has performed since August, on a month-to-month basis. Stocks also declined in November and December of that year.
On the horizon in the coming week is the December jobs report Friday, expected to show a continuing deterioration in the employment picture. But even before that markets will focus on auto sales for November on Tuesday and the Fed's beige book on the economy Wednesday.
Auto industry executives once more head to Capitol Hill Thursday and Friday for two days of hearings before Senate and House committees on their request for a bailout package. They are expected to be armed with documentation on how they would revamp their companies.
There are also two appearances by Fed Chairman Ben Bernanke. On Monday, he speaks on the economy to the Greater Austin Chamber of Commerce. He speaks on housing and housing finance Thursday at the Presidents' Conference on Homeownership and Mortgage Initiative in Washington.
President-elect Barack Obama, who helped spark the past week's stock rally with his appointment of an economics team, meets with governors in Philadelphia Tuesday.
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