By Arun Kumar, IANS,
Washington : After an abysmal 2008, Wall Street started the new year with a bang as stocks rallied and the Dow Jones closed above 9,000 for the first time since November.
The Dow Jones industrial average (INDU) rose 258 points, or 2.9 percent, to register the second-best start of the year on a point basis, according to Dow Jones. On a percentage basis, it was the sixth best start of the year.
The Standard & Poor’s 500 (SPX) index gained 3.2 percent and the Nasdaq composite (COMP) rose 3.5 percent.
“It’s the classic Santa Claus rally and people don’t want to miss the boat, although the volume is pretty light,” Joseph Saluzzi, co-head of equity trading at Themis Trading was quoted as saying by CNN.
According to the Stock Trader’s Almanac, a combination of the last five trading days of the previous year and the first two of the next have yielded an average return of 1.5 percent for the S&P 500 since 1950. The S&P was up 7.3 percent as of Friday’s close.
“It’s a nice start to the year, but we’re not going to get too excited about it until we see a sustained advance on higher volume,” said Matt King, chief investment officer at Bell Investment Advisors.
CNN said Saluzzi, King and other analysts are cautiously optimistic that Wall Street will recover some in 2009. However, the extent of any market recovery will depend on a variety of factors, including what kind of economic stimulus package the new Congress approves – and the depth of the recession.
Saluzzi said that investors need to be careful to not assume that the trend is now going to be up for most of 2009, as there is no reason why stocks couldn’t rally for a bit and then retreat, making new bear market lows.
Wednesday brought a positive end to one of the worst years on record. The Dow lost 33.8 percent in the year, the third worst in its history, following a drop of 52.7 percent in 1931.
The S&P declined nearly 38.5 percent – its worst yearly performance since an earlier version of the broad stock index lost 47 percent in 1931. The earlier incarnation had 90 US stocks in it.
For the Nasdaq, 2008’s loss of 40.5 percent is the tech-fueled index’s worst ever, going back to its inception in 1971.
Wall Street’s move higher comes amid light trading after the New Year’s holiday. Modest volume can lend buoyancy to the market as upbeat buyers have reason to come out and those with less conviction stay home.
Investors will be looking to Monday’s session, when volume is expected to be greater, as a better barometer of market sentiment for 2009.
In the week ended Wednesday Dec 31, investors pulled roughly $1.2 billion out of equity mutual funds, according to tracking firm Trim Tabs. In the previous week, investors pulled $15.5 billion out of funds.
But the manufacturing sector continues to weaken, according to the latest reports. The manufacturing index of Institute for Supply Management, a trade group of purchasing executives, fell to a 28-year low in December, declining more than what economists had been expecting.
The dollar was mixed against other major currencies, while gold prices fell.