Wall Street I: Fiscal cliff stalls Santas Claus rally
The annual “Santa Claus rally” – in which stocks historically tend to rise from Christmas Eve through the first few days of the new year – failed to eventuate as Washington’s political gridlock tightened its hold on financial markets.
As the markets closed on Boxing Day, stocks on Wall Street extended their losses into a third session as retailers were hit after the Christmas holiday and as investors looked to the next day’s resumption of budget talks.
In commodities, oil and gold futures rose slightly.
President Barack Obama and Congress are expected back in Washington on Thursday to resume talks to avoid the “fiscal cliff.” Talks ended without resolution before the Christmas break on December 24.
The Wall Street Journal reports that lawmakers are increasingly unlikely to agree on a comprehensive plan that would avoid the full brunt of the cliff – the combined $US500 billion in tax increases and spending cuts set to begin next week.
Little – if any – progress has been in made in the talks and with deadlines quickly approaching, a partial agreement may be the only reasonable hope at this point.
Since 1928, the S&P 500 has traded higher 79% of the time during the period spanning the last five trading days of the year and the first two sessions of the new year.
Historically, the index has averaged a 1.8% gain during this timeframe. A year ago, the S&P 500 rose 1.9% during the Santa rally.
At the market close, the S&P 500 index was down 0.5%, to 1420.11, with consumer and technology shares the poorest performers and natural resource faring the best among its 10 major industry sectors.
The Dow Jones Industrial Average shed 32.77 points, or 0.3%, to 13,106.31 and the Nasdaq Composite index retreated 0.7% to 2992.91.