The Santa Claus rally got off to a rousing start Tuesday as the Dow Jones industrial average gained 0.4 percent — adding to its best yearly performance in a decade.
The gain on Tuesday, sparked by a 3.5 percent rise in durable goods orders, brought to 10 the number of new highs for the Dow and S&P 500 this month.
“The combination of the Federal Reserve’s ‘taper-lite,’ a two-year budget deal, and better-than-expected US economic data could support the seasonal pattern of abnormally strong market returns during the holidays,” noted Bill Stone, chief investment strategist at PNC Asset Management Group.
The Santa Claus rally is defined as an uptick in stocks in the last five trading days of the year plus the first two trading days of the next year.
Since 1950, the seven-day periods have produced an average gain of 1.5 percent, according to the Stock Trader’s Almanac.
A Santa Claus rally portends a strong next year.
The Dow closed Tuesday at 16,357.55, while the S&P finished at 1,833.32, up 0.3 percent.
The S&P has climbed 29 percent this year and is on course for its biggest annual rally since 1997. The Dow is up 24.8 percent — its best annual gain since 2003’s 25.3 percent.
“The economic expansion is in good shape, and the stock market is reflecting that,” said Brad McMillan, chief investment officer for Commonwealth Financial Network.
“There’s also a rush to be in the market toward the end of the year, and I think that’s what is driving things here,” McMillan added.
The 10-year Treasury reached a three-month high as it flirted with breeching the 3 percent yield rate Tuesday before closing at 2.98 percent, rising 49 basis points, or 1.7 percent, for the session.