Visions of a "Santa Claus" rally danced in investors' heads Wednesday, but the market only managed a modest advance
On Christmas Eve, the stock market was looking for a "Santa Claus" rally. And investors did receive a modest market advance Wednesday, though it was somewhat like getting socks and underwear under the tree instead of that must-have video game.
U.S. stocks closed slightly higher Wednesday in a slow, holiday-shortened session. The stock market closed early on Wednesday at 1:00 p.m. ET, and it will be closed all day Thursday for the Christmas Day holiday.
Traders weighed a mix of economic data Wednesday, with some market players encouraged that the Mortgage Bankers Association's market index rose 48.0% to 1245 and the ABC/Washington Post Consumer Comfort index rose.
But other reports pointed to the ugly realities of the current economy. Weekly initial jobless claims rose 30,000 to 586,008; November durable goods orders fell 1.0%; November personal income fell 0.2%, and personal consumption fell 0.6%.
Bonds were higher. The dollar fell. Gold rose. Oil futures fell after the release of the government's weekly inventory report report.
On Wednesday, the 30-stock Dow Jones industrial average finished higher by 48.99 points, or 0.58%, at 8,468.48. The broader S&P 500 index added 4.99 points, or 0.58%, to 868.15. The tech-heavy Nasdaq composite index was up 3.36 points, or 0.22%, at 1,524.90.
On the New York Stock Exchange, 17 stocks were higher in price for every 12 that were lower. The ratio on the Nasdaq was 14-12 positive.
Retailers posted modest gains, breaking a string of five consecutive days of declines with hopes for a last-minute Christmas crush, reports Action Economics. Financials reversed higher after five straight days of losses. However, this sector is on pace for a 60% decline this year, making it the biggest loser of the ten industries in the S&P 500, notes Action Economics.
Some market players are hopeful a seasonal "Santa Claus" rally might be underway. "But for those worrying about Santa not delivering, we do note that there were several key bear market years, including 1987, 1966, and 1937, with no yearend seasonal strength, that were followed by up years," says Miller Tabak strategist Phil Roth.
London stocks fell 0.93%, Paris stocks were down 0.39%, while Frankfurt was closed for a holiday. Tokyo stocks fell 2.37%, Hong Kong stocks dipped 0.26%, and Shanghai stocks slumped 1.76%.
February West Texas Intermediate crude oil futures extended earlier losses Wednesday, plunging more than $3 to $35.50 per barrel following a Dept. of Energy report that showed crude oil stocks unexpectedly fell 3.1 million barrels to 318.2 million barrels, gasoline stocks rose 3.3 million barrels to 207.3 million barrels and distillate stocks rose 1.8 million barrels to 135.3 million barrels. Some disturbed inventories at the the Cushing, Oklahoma delivery point for the WTI crude oil contract rose 1.2 million barrels to an all-time high of 28.684 million barrels.
The Financial Times Deutschland reports that OPEC is now in a "panic" and considering an extraordinary meeting in January in an bid to address falling prices.
In economic news Wednesday, U.S. personal income fell 0.2%, below the -0.1% expected and October's 0.1% gain (downwardly revised from +0.3%). Consumer spending was down 0.6% in November, slightly better than the 0.7% drop expected and the 1.0% drop in October. It was the fifth consecutive monthly decrease. Disposable income fell 0.1%, while the savings rate rose 2.8%. The personal consumption expenditures deflator declined 1.1% over last month, after falling 0.5% in October. The deflator more than halved to a 1.4% year-over-year rate from 3.2% previously.
The core rate, excluding food and energy, was flat for the second straight month. On a year-over-year basis, the core rate decelerated to a 1.9% pace from 2.0% in October and the 2.4% pace in July and August.
U.S. durable goods orders dropped 1.0% in November after a sharp downwardly revised 8.4% decline in October (previously -6.2%). Markets expected a 2.5% drop in orders for the month. Orders are down 17.6% over last year. Transportation orders declined 7.4% over last month, but rose 1.2%, excluding transportation. Nondefense capital goods orders excluding aircraft, a key indicator for capital spending, climbed 4.7%, partially offsetting declines the two months prior. Shipments declined 2.6%, while inventories rose 0.5%, bringing the inventory-shipment ratio to 1.75 from 1.70.
"While the headline reading wasn't as bad as markets feared, the sharp downward revision the month before may keep markets concerned," notes S&P senior economist Beth Ann Bovino.
U.S. initial jobless claims rose 30,000 to 586,000 in the week ended Dec. 20, from 556,000 the week before. Markets expected a more modest increase to 560,000. The increase brought the 4-week moving average up to 558,000 from 544,250 previously. Continuing claims fell 17,000 to 4,370,000 in the week ended December 13, after dropping 44,000 to 4,387,000 the week before. The insured unemployment rate held at 3.3%.
Among companies in the news Wednesday, Micron Technology (MU) posted a 91-cent first quarter loss (including items) vs. a 34-cent loss one year earlier on an 8.7% total revenue decline.
Navistar International (NAV) to restate results for nine months ended July 31, '08; expects to increase reported net income by $50M-$70M, ($0.68-$0.95 per share) for nine months ended July 31, '08. Continues to affirm FY 08 guidance for net income of $467M-$548M, EPS of $6.35-$7.45, excl. charges for impairment of long-lived assets and related charges associated with certain assets in its Engine segment.
Prologis (PLD) announced that it made contributions of properties in North America, Europe and Japan during the fourth quarter for total proceeds of $1.26 billion. The contributions included a total of 59 properties in 12 countries, representing 15.2 million square feet of space.
Orbital Sciences (ORB) announced that it has been selected for a long-term contract by the National Aeronautics and Space Administration (NASA) to provide cargo transportation services to and from the International Space Station (ISS). Orbital stated that the contract, awarded under NASA's Commercial Resupply Services (CRS) program, has an expected value of about $1.9 billion for cargo transportation missions to be conducted between 2011 and 2015.