With Fed out of the way, what's next on Wall Street?

Sun Dec 22, 2013 6:04pm EST
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By Angela Moon

NEW YORK (Reuters) - With the U.S. Federal Reserve finally announcing it will start tapering its stimulus, it removed a big uncertainty in the market last week and raised the question: Can Wall Street expect a stronger finish to the year? Not really.

The "Santa Claus rally" is a seasonal anomaly that describes a rise in stock prices in December, generally over the final week of trading before the new year.

The benchmark S&P 500's average gain during the last five days of December and the first two of January has been about 1.5 percent since 1950, according to the Stock Trader's Almanac. The equities market has gone up in December about 80 percent of the time for the past 20 years.

Although the S&P 500 is up just about 1 percent so far this month, the index is up about 27 percent for the year and is on track for its biggest gain since 1997. The Dow is up about 24 percent and the Nasdaq is up almost 36 percent for the year.

"It's been a strong year, and I wouldn't be surprised if investors closed out their year today," said Doug Foreman, co-chief investment officer of Kayne Anderson Rudnick Investment Management in Los Angeles, in an interview late last week.

"There isn't much room or news to move higher from here until next year."

Stocks rallied sharply last week, with the Dow and the S&P 500 closing at records on Friday, following the Fed's mid-week announcement it will reduce its $85 billion in monthly bond purchases by $10 billion in January.

For the week, the Dow gained 3 percent, the S&P 500 rose 2.4 percent, and the Nasdaq climbed 2.6 percent.   Continued...

Traders work on the floor of the New York Stock Exchange shortly after the market opening December 19, 2013. REUTERS/Lucas Jackson