Some on Wall Street believe a Santa Claus rally will deliver more gains in the final weeks of the year, while others are playing it cautious until an upcoming Federal Reserve meeting is over.
Stock market participants are largely upbeat about the economic recovery, but whether the huge rally that began in March can be sustained remains an open question.
In the week to Friday, the Dow Jones Industrial Average of 30 blue-chips rose 0.8 percent to 10,471.50.
The technology-heavy NASDAQ composite, however, drifted down 0.18 percent to 2,190.31, while the Standard & Poor’s 500 broad-market index eked out a gain of 0.04 percent to 1,106.41.
The market action over the past week “may signal the beginnings of a multi-week Santa Rally,” said Duncan Davidson at VantagePoint Venture Partners, referring to the traditional gains around the year-end holidays.
However, many analysts say it may be hard to build on the gains of some 60 percent for the broad market in the current environment.
Stock market action is often cautious around the time of Fed meetings, and speculation has swirled around whether the central bank will make a move toward an exit strategy from its huge stimulus effort at a two-day meeting opening on Tuesday.
While some traders have begun to price in rate hikes next year, Michael Gregory at BMO Capital Markets said this may be premature. He argues that the Fed will continue to pump money into the economy at least until March.
“The big question is how long will policy remain on hold afterwards?” he said.
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