It’s That Time of Year


“And laying his finger aside of his nose, and giving a nod, up the chimney he rose.”‘Twas the Night Before Christmas, popularized by Clement Clarke Moore

The Street certainly has visions of sugar plums in its head this week, and will probably remain that way on balance for what’s left of the year. The rally that followed the Federal Reserve’s mini-taper decision is classic Wall Street, a possibility I alluded to in last week’s column and then discussed in more depth in last week’s “Market Minute” video. The first step of a long-awaited tightening is nearly always greeted with a big rally, even if this one isn’t quite tightening in the usual way.

In the near term, one should expect the move towards 1850 on the S&P 500 to continue. While short-term indicators are mildly extended, they are not really enough so to scare traders, not at this time of year, not with the retail investor pouring in. I am hearing anecdotes in that vein that suggest the end of the bull is creeping closer, but while prices are apt to take a day off here or there, the market is going to want to march higher into the end of 2013.

Longer term, it’s time to think about how to start reducing equity exposure at a measured pace. But we’ll leave that for the new year, and anyway, it should be data dependent, just like the Fed.

This issue and the next of MarketWeek are holiday editions, shorter than usual. I’m tempted to say that this is my gift to readers, if only to pre-empt someone else from saying it. I wish all of my readers a very Merry Christmas!

The Economic Beat (in holiday time)

The report of the week was the big revision to third-quarter GDP, originally reported at 2.6% annualized and now all the way up to 4.1%. The fourth quarter will show a much slower rate.

The economic event of the week was of course the Fed’s mini-taper, which will reduce the rate of its asset purchases from $85 billion a month to $75 billion a month.

Housing news was mixed. Three months of data on housing starts were flat; flat; up 20%. The government shutdown has evidently caused problems, and the report, which is subject to big revisions anyway, is probably not going to stand up. The existing home sales rate declined in November, falling year-on-year for the first time since 2011. The mortgage banker’s association composite application index hit a 12-year low.

Industrial production rebounded, though the year-on-year rate stayed both flat and modest. The New York and Philadelphia Fed manufacturing surveys were short of consensus, but mildly positive with the latter survey turning out somewhat better.

There will be some big reports out before the holiday, with November personal income and spending on tap for Monday, and durable goods and new home sales on Tuesday. The only post-Christmas report of note during the week will be weekly jobless claims, which have recently experienced quite a spike. It won’t be such a merry holiday for the million-plus long-term unemployed on the verge of losing their benefits.

The stock markets will close early, at 1PM on Tuesday the 24th (Christmas Eve), and reopen Thursday. Merry Christmas to all, and to all a good night.

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