The traditional “Santa rally” finally arrived late last week as investors responded to better domestic economic news and fewer crises from Europe. Consumer spending was slightly higher than expected, and an agreement to extend the tax cut for two months ended the week on a high note.
Friday turned in the lightest volume day of the year; breadth was even. But despite the disinterest, the Dow industrials achieved a triple-digit gain. At the close, the Dow Jones Industrial Average was up 124 points to 12,294 (up 1.02%), the S&P 500 rose 11 points to 1,265 (up 0.9%), and the Nasdaq gained 19 points at 2,619 (up 0.74%).
Of the few NYSE floor traders that hung around on Friday, some commented on the meaningless nature of the low-volume breakout of the Dow industrials. This is because much of the low volume created a wider spread than normal between bid and ask, and some mutual funds that lagged the Dow’s performance were grabbing the higher-quality, dividend-paying stocks for year-end window dressing.
As The Wall Street Journal put it, “Even the S&P 500’s push into positive territory is likely to be greeted with some trepidation by professional money managers.”
They are paid to “outperform” the broad S&P 500, and when they don’t bonuses are cut. The Journal went on to point out that only 23% ofU.S.stock-fund managers outperformed the S&P 500 so far this year.
Despite a close above its 200-day moving average at 1,250, the S&P’s “breakout” was came with the lowest volume of the year. This is a sign of poor sponsorship and questions the significance of the move higher. But price action trumps everything else, and so the near-term trend is up and traders should take advantage of it.
As for long-term investors, there are many quality stocks with high dividends that you should consider. GE (NYSE:GE), Proctor & Gamble (NYSE:PG), Verizon (NYSE:VZ) and Johnson & Johnson (NYSE:JNJ) are some that not only have high-dividend yields, but have a history of regular dividend increases.
And if you’re looking for fast profits, my colleague Joe Burns just closed a BIDU trade for a 158% profit, a FSLR trade for 143.75%, and a GOOG trade for 80%. Get in on his new trades now.Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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