Santa Claus rally arrives on schedule on Wall Street

12/23/2013 7:25 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Good news on consumer spending in November, Apple’s (AAPL) iPhone deal with China Mobile (CHL), and an upgrade on U.S. economic prospects in 2014 from International Monetary Fund managing director Christine Lagarde pretty much guarantee that Santa will visit Wall Street this year. And just about on schedule. The Santa Claus rally is short and, in most years, sweet. It takes in the last five trading sessions of the old year and the first two trading sessions of the new. The average annual gain for that period since 1972 for the Standard & Poor’s 500 is about 1.5%, according to the Stock Trader’s Almanac www.stocktradersalmanac.com .

Besides whatever momentum U.S. stocks had from their rally last week after the Federal Reserve decided to begin the taper of its $85 billion in monthly asset purchases with a modest reduction to $75 billion a month, stocks have been bolstered today by data on November consumer spending that argue that the economy might be able to grow in the fourth quarter by something like the 4.1% growth shown in the latest revised estimates for the third quarter. In numbers released this morning the Commerce Department reported that consumer spending grew by 0.5% in November, up from a 0.4% gain in October that was itself an upward revision from the originally reported 0.3%. The S&P 500 closed up 0.52% today and the Dow Jones Industrials closed up 0.46%.

Lagarde’s comments today added to market optimism about the U.S. economy. The IMF, the managing director said, was raising its estimate for 2014 economic growth in the United States from its October estimate of 2.6% growth for 2014. Lagarde didn’t give a new estimate—my assumption is that markets will have to wait for the next official update in April to see an exact number. But as lacking in details as these comments were, they certainly didn’t hurt the growing optimism about U.S. growth in 2014.

And finally, while Apple’s deal with China Mobile isn’t an indicator for anybody besides Apple and China Mobile, the 3.84% gain in Apple’s shares today helped push an outperforming NASDAQ Composite Index ahead 1.08% for the session. That kind of gain for the technology-heavy index adds a little more end of the year buying motivation. China Mobile will begin selling Apple’s iPhone 5S and 5C on January 17 with pre-registration for sales to begin on December 25. The deal will give Apple access for the first time to China Mobile’s 763 million customers. News releases so far haven’t said anything about pricing—and without knowing that it’s hard to estimate how many phones Apple/China Mobile will sell. But the deal is timed so that the phone will be available for New Year gift giving (New Year falls on January 31 in 2014) and that should result in decent “prestige” sales for even an expensive iPhone.

The one fly in the ointment today came from the same Commerce Department data release that showed a healthy increase in consumer spending. Personal income rose only 0.2% in November. That was better than the 0.1% drop in October but it still fell short of the 0.5% increase projected by economists surveyed by Briefing.com.

In other words incomes aren’t rising as fast as spending right now. That’s not good news for the sustainability of the recent upswing in U.S. GDP growth into 2014.

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