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Market ponders 'Santa Claus rally' odds for US stocks


[NEW YORK] With this week's big events finished, Wall Street is beginning to turn its sights back to the Federal Reserve and to the prospects of a "Santa Claus rally."

Next week's calendar is light compared with this week's news deluge, which included a European Central Bank meeting, an Opec meeting and major public appearances by Federal Reserve Chair Janet Yellen.

The schedule next week includes November retail sales and little else, leaving plenty of room for debate on the year's final Federal Reserve policy meeting on December 15-16.

Some analysts believe rising confidence that the Fed will finally hike interest rates in 10 days has created more certainty for investors, setting the stage for a last push higher. Since 1928, the S&P 500 has risen three-fourths of the time in December.

"We're feeling pretty good," said Scott Wren, senior global equity strategist, Wells Fargo Investment Institute. "Over the next three weeks, I think we're going to see a positive move higher."

Mr Wren predicted the Fed would accompany the December rate hike with "a lot of verbiage about going slow" on future rate hikes.

But Tom Cahill, portfolio strategist at Ventura Wealth Management, said "the market would continue to move sideways until earnings improve." He expects choppiness.

"If the Fed conveys that the rate hike trajectory is going to be at a slow pace the market can go higher when earnings improve," Cahill said.

For the week, the Dow Jones Industrial Average climbed 0.19 per cent to 17,847.63, while the broad-based S&P 500 rose 0.08 per cent to 2,091.69. Both indices are modestly positive for 2015.

The tech-rich Nasdaq Composite Index, which is up 8.6 per cent for the year, added 0.29 per cent at 5,142.27.

The market's relatively flat performance this week masked some major swings.

On Monday, US stocks retreated following dreary appraisals of the "Black Friday" holiday shopping weekend. But reports of strong digital sales on "Cyber Monday" helped lift stocks the next day.

US stocks tumbled sharply on Thursday after the European Central Bank enacted a stimulus package that fell short of market expectations.

But US stocks recovered the losses and then some on Friday after the Labor Department reported the US added a solid 211,000 jobs in November, raising expectations the Federal Reserve will raise interest rates this month. All three stock indices added 2.1 per cent.

Energy stocks remained under pressure as the Organization of the Petroleum Exporting Countries announced no change in the cartel's production. The meeting highlighted a widening gap in views between Middle Eastern countries that have advocated high output and Venezuela and others that want to cut back in response to low oil prices.

In corporate news, Yahoo was in the spotlight following reports the company is considering selling its core Internet business amid uncertainty about whether it will receive a favorable opinion from US tax officials on the planned spinoff of its stake in Chinese e-commerce giant Alibaba.

Facebook founder Mark Zuckerberg announced he and his wife Priscilla Chan planned to donate 99 per cent of their shares in Facebook, or some US$45 billion, in a philanthropy initiative "to improve the lives of all those coming into this world."

They made the pledge as they announced the birth of their daughter Maxima.