- The Washington Times - Sunday, December 18, 2005

NEW YORK (AP) — The last two weeks of the year traditionally are a time of light volume but rising stocks on Wall Street. Yet this year, there may not be enough of a rise to take to the bank.

The stock market’s “Santa Claus” rally marched through Wall Street through November, but seemed to have made an exit along with the Macy’s Thanksgiving Day Parade. Stocks have been flat for weeks, with investors concerned about a difficult winter and conflicting reports about 2006.

Wall Street is still hoping the Dow Jones Industrial Average will crack the 11,000 mark before year’s end. Although generally meaningless to serious investors, it is hoped such an achievement, which would represent the best showing for the market in four years, would provide a psychological boost.

Despite the Dow reaching 10,997.50 intraday on Nov. 28, the index slumped throughout December and could not mount a sustainable rally of note last week. For the week, the Dow gained 0.9 percent and the Standard & Poor’s 500 index rose 0.63 percent, but the Nasdaq Composite Index fell 0.19 percent as investors moved out of technology stocks and small-cap companies and into larger, less risky holdings.

There is still a chance the Dow could reach 11,000 over the next two weeks. Mutual fund and hedge fund managers likely will try to polish their year-end returns by buying up stocks in the last nine days of trading for 2005. It’s possible.

But even if 11,000 happens, the Dow won’t stay there long. Come the new year, the funds that bought up stocks in December will cash out in January. Enough investors are likely to see 11,000 as a signal to sell to make sure the market doesn’t head back there any time soon.

Mediocre economic data won’t help the markets much in the week ahead. Tomorrow, the Labor Department will release its Producer Price Index, a measure of inflation on the wholesale level. The PPI is expected to drop 0.4 percent for November, after a 0.7 percent October rise, because of falling energy costs. But so-called “core” PPI, with energy removed from the equation, is expected to rise 0.2 percent after a 0.3 percent drop in October. At best, that is a middling result that likely will leave investors unimpressed.

On Wednesday, the Commerce Department will release the final word on the third quarter’s gross domestic product. GDP is expected to have grown 4.3 percent in the July-to-September period, on par with previous estimates.

Finally, on Friday, the University of Michigan releases its revised Consumer Sentiment Index for December, which is expected to rise to 89 from an 88.7 reading a few weeks ago. Unless the number is substantially better — or worse — the usually market-moving index is unlikely to move anything.

A few important corporate-earnings reports could boost some sectors during the week. Tomorrow, Wall Street investment firm Morgan Stanley will release its fourth-quarter earnings, and investors will look closely to see what new Chief Executive John Mack is doing to reverse the firm’s fortunes.

Morgan Stanley stock has climbed 19 percent from its 52-week low of $47.66 on May 13, mostly because of Mr. Mack’s ascension. The company is expected to earn $1.10 per share, up from $1.09 per share last year. Morgan Stanley closed Friday at $56.88.

Investors with a stake in the retail sector will be interested in Circuit City Stores Inc.’s earnings, due out this morning. The electronics retailer is expected to post a 3-cents-per-share profit, reversing a loss of 3 cents per share in the year-ago quarter. Circuit City shares have climbed steadily throughout the year, rising 59 percent from a 52-week low of $13.40 on Jan. 12 to close Friday at $21.25.

On Wednesday, shipper FedEx Corp. will release its earnings before the trading session and is expected to earn $1.40 per share, compared with $1.25 per share a year ago. Despite high fuel costs, the company’s stock rallied sharply in the fourth quarter of the year, rising 30 percent from a 52-week low of $76.81 on Sept. 20, closing Friday at $99.90.

Christmas falls on Sunday, so the bond and stock markets will be closed next Monday in observance. Both markets will be open during regular hours throughout this week.

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