Low volume rally on Wall Street sets tone for next year
Stocks rose on Thursday, resuming their upward move into year-end, as positive data on the U.S. economy offset concerns about the euro zone.
But the S&P 500 continued to churn around its 200-day moving average, although the index was back in positive territory for 2011 ahead of the last trading day of the year. Scant volume increased the market's volatility.
The low-volume rally is likely to continue to tomorrow, sort of setting the stage of the first quarter of next year, said Uri Landesman, president of Platinum Partners in New York.
I am bullish on the beginning of next year because the market has discounted a lot of bad news out of Europe already and technically the market is due for a early bounce.
The Dow Jones industrial average <.DJI> was up 107.17 points, or 0.88 percent, at 12,258.58. The Standard & Poor's 500 Index <.SPX> was up 9.78 points, or 0.78 percent, at 1,259.42. The Nasdaq Composite Index <.IXIC> was up 17.37 points, or 0.67 percent, at 2,607.35.
Italian bond yields, which helped break a five-day rally with a sharp selloff in the last session, eased on Thursday after a debt auction.
Stocks added to gains after the euro erased losses against the dollar, rebounding from a 15-month low in thin trading.
But the yield on 10-year Italian bonds hovered near 7 percent, a level markets see as a danger zone for Italy's government debt.
Pending sales of existing U.S. homes surged to a 1-1/2 year high in November, offering more signs of a tentative housing recovery. That report drove the Dow Jones home builders index <.DJUSHB> up 3.5 percent.
In addition, factory activity continued to grow in the U.S. Midwest in December, as purchasing managers reported rising prices and employment, even though production eased slightly.
Banks were the biggest gainers along with commodity-related sectors that sold off hard on Wednesday. The S&P financial index <.GSPF> rose 1.2 percent, while the capital goods sector <.GSPIC> added 1.1 percent.
Concerns over Europe's sovereign debt crisis resurfaced Wednesday, sparking a 1 percent drop in major indexes. The S&P 500's slim gains for the year were erased and the index pulled back below its 200-day moving average.
This year, the 200-day moving average has been a critical level for the S&P 500 as investors look for a significant break above that level before committing capital. The measure is often used to gauge the market's longer-term strength.
On the down side, initial claims for jobless benefits rose more than expected, giving a mixed labor picture, but investors said the trend was still lower.
Recent economic data, including reports on housing, have been largely positive, contributing to stocks' gains over the past month and the view that economic growth is picking up steam.
We have seen a pretty encouraging trend in the U.S. economic data over the last two months, said Peter Jankovskis, co-chief investment officer of OakBrook Investments in Lisle, Illinois. If that trend continues, that will provide good support and perhaps some upward momentum.
The next big test for markets in terms of U.S. economic data will be the December payrolls report at the end of next week.
For the year, the Dow is up 5.8 percent and the S&P 500 is up 0.1 percent, while the Nasdaq is down 1.7 percent.
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(Reporting By Angela Moon; Editing by Jan Paschal)
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