By Jack Healy and Vikas Bajaj Wall Street began the new year with a surge on Friday, closing above 9,000 for the first time since early November and offering some optimism about the year as a whole.
At the close, the Dow Jones industrial average was 258.30 points, or 2.9 percent, higher, at 9,034.69, and the broader Standard & Poor’s 500-stock index was at a two-month high, rising 28.55 points, or 3.1 percent, to 931.80. The technology heavy Nasdaq was up 3.5 percent, to 1,632.21. The last time that the Dow closed above 9,000 was Nov. 5, the day after Barack Obama was elected president.
“You’re going to have to call this a trading rally that’s part of the larger bear market complex,” said William Rhodes, chief investment strategist of Rhodes Analytics. “At least it’s a good way to start out.”
The surge followed jumps on Tuesday and Wednesday of more than 384 points combined, which put an optimistic cap to a year in which the Dow plunged 4,488.43 points, its most punishing loss since 1931.
On Friday, investors seemed to shrug off a disappointing economic report on manufacturing. The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index was 32.4 in December, down from 36.2 in November. A number below 50 indicates a contraction.
“Manufacturing activity continued to decline at a rapid rate during the month of December,” said Norbert J. Ore, chairman of the Institute for Supply Management Manufacturing Business Survey Committee. The index was at the lowest reading since June 1980, when it was 30.3 percent.
“This report indicates that the U.S. economy was on even weaker footing than commonly believed as 2008 came to a close,” said Joshua Shapiro, chief United States economist at MFR, a research group.
Still, Friday’s surge led many to think optimistically. Among Wall Street’s many proverbs, traders say one stands above the others: “As goes January, so goes the year.”
Though it has been trotted out at the start of virtually every year since it was first coined in the 1970s, the saying has a special resonance given the brutal, 38 percent drop in the stock market in 2008. Its appeal is probably all the more powerful now because investors remember that last year’s rout was presaged by a 6.1 percent drop in the Standard & Poor’s 500 last January.
“Most of that is nonsense,” Jim Paulsen, chief investment strategist for Wells Capital Management, said about Wall Street aphorisms . “The only one that I might throw in a different category is the January deal.”
In fact, in 60 of the last 80 years, the performance of the S.&P. 500 index has accurately predicted whether stocks would end higher or lower for the year, according to calculations by Howard Silverblatt, an index analyst for S.& P.
One variation of the proverb has it that the first five days of trading are the best predictor of the year to come. Others look at the last five days of trading in December and the first five days of trading in January.
Academics who have confirmed the existence of the so-called January barometer effect say they have no good explanation. Investment specialists like Mr. Paulsen and Mr. Silverblatt offer several explanations: investors often make annual contributions to individual retirement accounts at the start of the year and mutual fund managers sell poorly performing stocks in December to “pretty up” their year-end statements and reinvest the money early in the new year.
Shares on Friday shares moved higher in a broad rally, led by energy and media, as well as the automobile sector. Shares of both Ford and General Motors rose, still riding investor optimism about the bailout of the automobile sector and news earlier this week that GMAC, the lending arm of G.M., was easing its lending restrictions somewhat.
Ford was up 5.2 percent, to $2.41 and G.M. was up 14.3 percent, to $3.66.
Shares of Exxon Mobil rose 2.2 percent, to $81.84 while Chevron rose 3.4 percent, to $76.52.
Friday’s big move came amid light trading. Volume should return to more normal levels on Monday, the first full week of the year. Next week, investors will need to absorb a number of economic reports, including year-end auto sales, retail sales and the latest unemployment report.
World stock markets also rose, though trading volumes remained light.
In London, the FTSE 100 closed up 2.8 percent, while the DAX in Frankfurt rose 3.3 percent and the CAC-40 in Paris 4 percent.
Earlier, Hong Kong’s Hang Seng Index led what Asian markets were open higher, vaulting 4.6 percent . Many of Asia’s markets, including Japan’s Nikkei, were closed.
In the oil markets, crude moved up $1.74, to $46.34. The increase, also in light trading, came a day after the OPEC cartel had pledged to begin cut its production by 2.2 million barrels a day as a way to shore up prices.
At the close, the Dow Jones industrial average was 258.30 points, or 2.9 percent, higher, at 9,034.69, and the broader Standard & Poor’s 500-stock index was at a two-month high, rising 28.55 points, or 3.1 percent, to 931.80. The technology heavy Nasdaq was up 3.5 percent, to 1,632.21. The last time that the Dow closed above 9,000 was Nov. 5, the day after Barack Obama was elected president.
“You’re going to have to call this a trading rally that’s part of the larger bear market complex,” said William Rhodes, chief investment strategist of Rhodes Analytics. “At least it’s a good way to start out.”
The surge followed jumps on Tuesday and Wednesday of more than 384 points combined, which put an optimistic cap to a year in which the Dow plunged 4,488.43 points, its most punishing loss since 1931.
On Friday, investors seemed to shrug off a disappointing economic report on manufacturing. The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index was 32.4 in December, down from 36.2 in November. A number below 50 indicates a contraction.
“Manufacturing activity continued to decline at a rapid rate during the month of December,” said Norbert J. Ore, chairman of the Institute for Supply Management Manufacturing Business Survey Committee. The index was at the lowest reading since June 1980, when it was 30.3 percent.
“This report indicates that the U.S. economy was on even weaker footing than commonly believed as 2008 came to a close,” said Joshua Shapiro, chief United States economist at MFR, a research group.
Still, Friday’s surge led many to think optimistically. Among Wall Street’s many proverbs, traders say one stands above the others: “As goes January, so goes the year.”
Though it has been trotted out at the start of virtually every year since it was first coined in the 1970s, the saying has a special resonance given the brutal, 38 percent drop in the stock market in 2008. Its appeal is probably all the more powerful now because investors remember that last year’s rout was presaged by a 6.1 percent drop in the Standard & Poor’s 500 last January.
“Most of that is nonsense,” Jim Paulsen, chief investment strategist for Wells Capital Management, said about Wall Street aphorisms . “The only one that I might throw in a different category is the January deal.”
In fact, in 60 of the last 80 years, the performance of the S.&P. 500 index has accurately predicted whether stocks would end higher or lower for the year, according to calculations by Howard Silverblatt, an index analyst for S.& P.
One variation of the proverb has it that the first five days of trading are the best predictor of the year to come. Others look at the last five days of trading in December and the first five days of trading in January.
Academics who have confirmed the existence of the so-called January barometer effect say they have no good explanation. Investment specialists like Mr. Paulsen and Mr. Silverblatt offer several explanations: investors often make annual contributions to individual retirement accounts at the start of the year and mutual fund managers sell poorly performing stocks in December to “pretty up” their year-end statements and reinvest the money early in the new year.
Shares on Friday shares moved higher in a broad rally, led by energy and media, as well as the automobile sector. Shares of both Ford and General Motors rose, still riding investor optimism about the bailout of the automobile sector and news earlier this week that GMAC, the lending arm of G.M., was easing its lending restrictions somewhat.
Ford was up 5.2 percent, to $2.41 and G.M. was up 14.3 percent, to $3.66.
Shares of Exxon Mobil rose 2.2 percent, to $81.84 while Chevron rose 3.4 percent, to $76.52.
Friday’s big move came amid light trading. Volume should return to more normal levels on Monday, the first full week of the year. Next week, investors will need to absorb a number of economic reports, including year-end auto sales, retail sales and the latest unemployment report.
World stock markets also rose, though trading volumes remained light.
In London, the FTSE 100 closed up 2.8 percent, while the DAX in Frankfurt rose 3.3 percent and the CAC-40 in Paris 4 percent.
Earlier, Hong Kong’s Hang Seng Index led what Asian markets were open higher, vaulting 4.6 percent . Many of Asia’s markets, including Japan’s Nikkei, were closed.
In the oil markets, crude moved up $1.74, to $46.34. The increase, also in light trading, came a day after the OPEC cartel had pledged to begin cut its production by 2.2 million barrels a day as a way to shore up prices.
