Ho! Ho! Ho! Momentum rules the season

12/26/2013 5:11 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

I hope everyone had a wonderful Christmas yesterday. In New York we've had a bit of everything this season with a little pre-Christmas snow and then a few days of balmy near 70 degree temperatures. Most of the family trekked to the Cathedral of St. John the Divine for a holiday concert of 16th century Bohemian and Polish Christmas music before hosting our traditional Christmas day dinner with all our Jewish friends.

Meanwhile back on Wall Street...

The momentum continues to the upside for U.S. stocks. With volume on the New York Stock Exchange just 410 million shares (versus an average of 725 million) it didn’t take much news for shares to move higher. The Dow Jones Industrial Average climbed for a sixth consecutive session and the Standard & Poor’s 500 rose for a fourth straight session. Both indexes ended the day at new record highs.

A report that initial claims for unemployment fell to 338,000 from a revised 380,000 in the previous week was the big U.S. economic news for the day. Economists surveyed by Briefing.com had projected a drop of 350,000 so today’s numbers constituted better than expected news. Well, at least, it is better than expected news if you don’t remember that seasonal adjustments for the holiday season always make all weekly jobs numbers even more of a guess than usual at this time of year.

Just in case you need a reminder that the Santa Claus rally is a very limited phenomenon that on average runs for the last five sessions in the old year and the first two in the new, the bond market is gradually moving to limit gains. The 10-year Treasury fell sending the closing yield for the day up to 2.99%. The yield on this Treasury benchmark has tacked on almost 11 basis points since the Federal Reserve announced on December 18 that it would begin to taper its $85 billion in monthly asset purchases starting in January. (100 basis points equals one percentage point.)

Eleven basis points isn’t enough of an increase in Treasury yields to put an end to this rally but it is a reminder that each bit of data that suggests the U.S. economy is stronger than expected pushes bond yields up a bit too. And that constitutes a kind of automatic damper on any stock market rally from current record levels.

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