Bulls make a statement in stocks, commodities as 2010 kicks off
Risk-takers were in control in world markets Monday as stocks and commodities rallied on the first trading day of the new year.
If buyers can keep the upper hand all week they’ll send an encouraging signal about 2010: Historically, Wall Street’s trend in the first five days of the year has been a highly reliable indicator of the market’s direction for the year.
Fresh economic data encouraged market bulls Monday, as did a weaker dollar. Energy stocks led the Standard & Poor’s 500 index higher as oil jumped to a 14-month high, closing above $81 a barrel, amid a new blast of cold weather in the eastern U.S.
But stocks’ rally broadened well beyond energy. Rising issues outnumbered losers by more than 4 to 1 on the New York Stock Exchange. All 10 major stock industry groups in the S&P 500 were higher for the day.
With the books closed on 2009, some institutional investors on Monday may have been making asset-allocation shifts for the new year -- pumping cash into sectors they figure will do well in 2010.
That may have helped gold and other commodities in particular, said Larry Young, senior trader at Infinity Futures in Chicago. Within the Reuters/Jefferies CRB index of 19 commodities, 15 were up for the day, led by coffee, orange juice and wheat. The index surged 2.1% for the session after rising 23% in 2009.
Near-term gold futures rebounded $22.50 to $1,117.70 an ounce. Gold had tumbled in December after reaching a record high of $1,218 on Dec. 3.
Dollar weakness also usually helps commodities. The DXY index of the dollar’s value against six other currencies was off 0.5% for the session. The index had jumped 4% in December as the dollar rebounded.
As for stocks, the Dow recouped all 120 of the points it lost on Thursday, when the market slumped in the final 30 minutes of trading for the year.
Wall Street pays a lot of attention to the market’s tone at the start of the year: Since 1950 the net change in the S&P 500 in the first five days of the year has signaled its direction for the year 72% of the time, according to the Stock Trader’s Almanac. Last year, the S&P was up 0.7% in the first five days; it rose 23% for the year, despite falling to 12-year lows in March.
Just note, though, that when the first-five-days barometer fails to work it can be painful. The S&P was up 1.1% in the first five sessions of 2002 -- but still slumped 23% that year. And the Almanac notes that the barometer's track record is "spotty" in mid-term election years, and we're in one in 2010.
-- Tom Petruno
Photo credit: Richard Drew / Associated Press