Wall Street rally eases as year-end in view
U.S. stocks edged lower on Thursday as the recent rally and light volume left investors reluctant to take on much more risk before the new year.
After a 6.5 percent rally this month even a series of better-than-expected economic reports was not enough to spark buying activity on the penultimate trading day of the year.
Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois said investors will need to see signs of an sustained improvement in the economy to keep the rally alive next week.
It will be interesting to see once we get past the holiday season if this holds up, he said, referring to government data on Thursday that showed claims for jobless benefits fell to a two-year low. We are stuck in that very narrow range until we start next year.
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The Dow Jones industrial average <.DJI> dropped 23.46 points, or 0.20 percent, to 11,561.92. The Standard & Poor's 500 Index <.SPX> fell 2.34 points, or 0.19 percent, to 1,257.44. The Nasdaq Composite Index <.IXIC> lost 3.58 points, or 0.13 percent, to 2,663.35.
The S&P 500 is on course to close out its best December since 1991 when the index rose 11.2 percent.
Technical indicators such as the S&P 500's relative strength index and elevated levels of bullishness are leading some investors to call for a pullback.
Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey said he expects equities to retreat in February, confounding widespread expectations of a January retreat.
The common sense of the street is that we get pullback after this Santa Claus rally and a very strong run up in the S&P since August, he said. But I don't think it will be in early January because everybody is expecting it.
Analysts said investors were leery of taking large positions until next year, despite the positive data, as light holiday trading volume, coupled with the recent run-up, left the market more susceptible to volatile swings.
Data suggesting the economic recovery was gaining traction had little impact.
New U.S. claims for unemployment benefits dropped 34,000 to a seasonally adjusted 388,000, the Labor Department said, the lowest reading since early July 2008. That was well below economists' expectations for 415,000.
A report from the Institute for Supply Management-Chicago showed activity in the U.S. Midwest jumped unexpectedly in December, with help from a gain in employment and new orders.
(Reporting by Edward Krudy; Editing by Chizu Nomiyama)
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