December has earned a reputation for being a good time for stocks, a seasonally strong period when investors are full of holiday cheer and feeling flush thanks to year-end bonuses.
In fact, the last month of the year has delivered an average gain of 1.6 percent on the Standard & Poor's 500 going back to 1950, according to the Stock Traders' Almanac. Over the last 54 years, stocks have lagged in only 13 Decembers.
But this year, after a solid post-election advance and with the major indexes already hovering in the range of many analysts' projections for this year, a Santa Claus rally is far from a sure thing. Volatile oil prices and a feeble dollar are formidable impediments to a further move up next year. But many market watchers, including Kenneth McCarthy, chief economist with vFinance Investments Inc, think those can be overcome in the near-term.
"As long as oil prices don't rise substantially, if we remain in the mid-US$40-per-barrel range or even a bit higher, I think the market has a good deal of momentum and can rise a bit, especially if we see some good retail numbers," McCarthy said. "I'm fairly optimistic that this could be one of those Decembers when prices rise."
The fear is that a spike in home heating oil prices could divert consumer spending during the holiday shopping season, which is being closely watched amid strong hopes that it will be the most profitable Christmas for retailers since 2000.
Stocks finished mixed in post-holiday trading on Friday as Wall Street meandered through a lackluster day. The major indexes ended the week higher as investors looked forward to the results of the first weekend of holiday shopping and a key jobs report next week.
Wall Street struggled to continue its bullish streak, albeit in very light trading, but continued weakness in the dollar weighed on stocks.
Reports that the Chinese central bank had sold off some of its US Treasury notes due to the low US dollar turned out to be unsubstantiated, boosting the dollar against the yen. The dollar reached another new low against the euro, however.
The trading day ended at 1pm as part of the Thanksgiving holiday weekend.
According to preliminary calculations, the Dow Jones industrial average rose 1.92, or 0.02 percent, to 10,522.23.
Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index was up 0.89, or 0.08 percent, at 1,182.65, while the NASDAQ composite index lost 0.57, or 0.03 percent, to 2,101.97.
The holiday-shortened trading week reflected lingering enthusiasm over Wall Street's prospects for a continued year-end rally. The dollar's weakness continued to weigh on the markets, however, keeping the week's gains minimal.
For the week, the Dow rose 0.62 percent, the S&P 500 gained 1.05 percent, and the NASDAQ was up 1.51 percent.