NEW YORK (CNN/Money) -
The New Year is still a few days away, but Wall Street already seems to have popped the champagne corks and pulled out the party hats.
Stocks picked up their months-long rally last week, driving the Dow Jones industrial average to its highest close since June 2001 and lifting the S&P 500 index to its best levels since August of that year.
The major gauges all gained more than 1 percent for the week, even as mixed economic data helped sink the dollar to a record low against the euro. (For a preview of the week's key economic events, click here.)
In the two months since the latest rally started on Oct. 25, the S&P 500 has jumped 10.5 percent.
Now as the year draws to a close, the Dow is up 3.5 percent so far in 2004, while the Nasdaq composite and S&P 500 have done even better, up about 8 percent and 9 percent, respectively.
Those gains don't quite compare with last year's big gains, when the S&P 500 jumped 27 percent. But given the seesaw action and uncertainty that preceded the market's fourth-quarter run, investors must be sleeping easier.
Heading into the final trading days of the year, strategists say the rally looks poised to continue even if volume is light.
"I see no signs of weakness in this market at this moment," said Ken Tower, chief market strategist at CyberTrader, a subsidiary of Charles Schwab (Research). "The historical pattern and the current market trend suggest to me that next week will be a good week for the market."
The Dow has risen on the first trading day after Christmas in 11 of the last 13 years, and the historical pattern calls for a so-called Santa Claus rally over the last five trading sessions of the year and the first two of the new year.
Those stocking-stuffer sessions have produced average gains of 1.7 percent since 1969, according to the Stock Trader's Almanac.
Adding to the momentum, January is traditionally a strong month for stocks, as investors plow new money into the market.
Yet some market watchers note that the traditional year-end rally may face some pressure this year in the form of investors looking to take profits.
"We might find some people selling off the big winners," said Michael Carty, principal at New Millennium Advisors, "because they might want to take some capital gains against the capital losses they've taken in recent years."
The week ahead will bring no major corporate earnings reports, and only a trickle of economic news.
Key events in the week ahead
- The Conference Board's consumer confidence index for December, due Tuesday, is expected to rise to 93.5 from 90.5 in November, according to economists surveyed by Briefing.com
- Existing home sales for November, due Wednesday, are forecast at an annual rate of 6.75 million, unchanged from the prior month
- The Chicago Purchasing Managers' Index due Thursday is expected to fall to 63 from November's 65.2, a sign of a manufacturing slowdown in the Midwest
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