Ho Ho Ho, Santa Where’s the Dough?!
Picks of the Day December 22, 2017.
The 3 large indexes on Wall Street recorded gains on Thursday, led higher by bank and energy stocks as investors placed their bets on the sectors most sensitive to the economy.
The energy sector (XLE) and the financial sector (XLF) were the drivers behind the gains on the 11 S&P 500 sectors. The financial sector has recorded gains of 21% year-to-date, compared to the gains of 20% on the S&P 500. In contrast, the energy sector has lagged behind this year, trading off 4.2%. It could be that Thursday signified a rotation to stocks that are especially sensitive to the economy.
The crude giant, Chevron (CVX), soared 3.3%, having earlier hit a historic high at the $125.35 level, after the brokerage firm, Cowen&Co. raised its price target for the stock by almost 30% to $160!
The optimism about economic growth stems from Congress having passed its $1.5 trillion tax reform earlier in the week. The bills will lower the corporate tax rate to 21% from 35%. Investors are hopeful that the lower corporate tax rate will spur companies to spend more on cash dividends and open-market stock buybacks.
In Summary for the Day: The Dow Jones rose 0.23%, the S&P 500 tacking on 0.2%. The NADSAQ ended slightly up by 0.06%.
About 6.08 billion shares traded hands on U.S. exchanges, beneath the 6.88 billion average over the last 20 trading days.
Friday: Officially, the timeframe for a Santa Claus rally would start today; historically, the rally spans the last 5 trading days of the year and ends on January 3rd, two days into the new trading year.
More than anything, a Santa Claus rally is likely to serve as an apt indicator of the market’s defences, or the lack thereof! On the last 6 occasions that Santa Claus didn’t show up in the outgoing year, on 3 instances the market ended flat in the incoming year: 1994, 2005, and 2015. Two of the years, though, even put the bears in the driver’s seat: 2000 and 2008. In 2016, the S&P 500 shed 2% during the period in which we would have hoped for a Santa Claus rally – and then continued to fall 10.5% during January, in one of the worst starts ever to a trading year. In the end, the bottom was set on February 11th, and from thereon, the tide turned, 2016, then boasting gains of 9%!
The Economic Diary is now jam-packed leading up to the end of the year. Today will kick off with durable goods orders alongside private income and spending at 8:30 N.Y. time. Later in the day, after trading has begun, investors will await new home sales and the University of Michigan Consumer Confidence Index at 10:00.