NEW YORK (CNN/Money) -
Jingle bells, jingle bells, stock gains on the way, but nothing to write home about, they'll be muted, analysts say.
Since 1950, December has been the best month for the S&P 500 and the second best month for the Dow, according to the Stock Trader's Almanac. Since 1971, when the Nasdaq began trading, December has been its second best month.
In particular, the last five sessions of the year and the first two of January tend to be very strong.
This year, however, it will be tough for December to end up No. 1 or No. 2. (For the best months for the major indexes this year, see chart.)
"We expect the year to end 2 to 3 percent higher or lower than where it is now," said Douglas Altabef, managing director at Matrix Asset Advisors. "The case for it going down is a massive run of profit taking. The case for it going up is people wanting to get a jump on the January rally."
The case for the market not moving that much either way is that it already has risen so much.
As of Monday's close, year-to-date, the Dow is up 18.7 percent, the Nasdaq is up 49 percent, the S&P 500 is up 21.6 percent and the Russell 2000, which measures small caps, is up 44.8 percent.
If the first session of December is any indicator, improving economics should provide something of a catalyst. Monday's reports showed that manufacturing is surging and that the holiday shopping season is unlikely to disappoint.
But whether that is enough to jump-start a new stage of the rally is up in the air.
"The fundamentals are improving, so that's great, but there's always the risk after the run-up of the market being a bit tapped out," said Michelle Clayman, chief investment officer at New Amsterdam Partners. In addition, the continued weakness of the U.S. dollar could prove problematic, Clayman added. Clayman's year-end target for the S&P is for a range of 1,050 to 1,075.
September, usually terrible, was flat for the major indexes. October, which usually starts out terribly, but ends fairly even, thanks to a late-month surge, was pretty terrific throughout. November, usually a big hero, closed mixed. All of which means December could defy seasonal trends and fail to take off as substantially as in past years.
"We may need some new impetus to get past the highs we've hit this year," said Donald Selkin, director of research at Joseph Stevens, noting that 2003 is the first year since 1996 that the market hasn't had a pullback of more than 5 percent after rallying.
"We saw a 2 or 3 percent pullback in early November and it has come back since then," added Selkin. "What could take us higher in December is a good pre-announcement season."
Fourth-quarter earnings are expected to show a gain of between 22 percent and 24 percent versus a year earlier.