Stocks ended the next-to-last day of 2009 virtually unchanged despite welcome news in manufacturing. A rising dollar and light volume held the market’s gains in check. Year-to-date, the Dow has risen 20%, the S&P has climbed almost 25%, and the Nasdaq has gained 45%. All three indexes have posted more substantial gains, since falling to multi-year lows on March 9 amid the height of the financial crisis.
The market drew support on Wednesday from a key economic indicator that signaled growth in Midwest manufacturing for a third straight month. The Chicago Purchasing Managers Index rose to 60 in December from 56.1 in November. The report found that production and new orders increased and employment improved. On the other hand, concern that the Fed will unwind programs to bolster the economy was spurred after the Institute for Supply Management-Chicago said its business barometer rose to 60, the highest level since January 2006.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, has tumbled 75% to 19.96 since soaring to an all-time high of 80.86 in November 2008. It measures the cost of using options as insurance against declines in the S&P 500.
Office Depot Inc. (ODP) and Macy’s Inc. (M) led consumer- discretionary companies to the biggest drop among 10 groups in the Standard & Poor’s 500 Index. Apple Inc. (AAPL) moved up to $211.64 an all time high, after its share-price estimate was boosted by Kaufman Brothers to $253 from $235. Nvidi Corp. increased 3.6% to $18.67, after the maker of graphics chips was raised to buy from hold, after Kaufman cited the company’s potential to benefit from improving demand for personal computers in 2010.
Pessimism about U.S. stocks among newsletter writers fell to the lowest level since April 1987, six months before the 20% crash in the S&P 500 known as Black Monday. The proportion of bearish publications among about 140 tracked by Investors Intelligence fell to 15.6% yesterday from 16.7% a week earlier. Sentiment has improved since October 2008, when the financial crisis drove bears to a 14-year high of 54.4%. Some analysts consider lower pessimism as a sign that stocks will stop advancing, under the theory that there are fewer bearish investors left to change their minds and purchase shares. Also, Marc Faber told CNBC that in the near term stocks are “a bit overbought.”
The S&P 500 has fallen 23% since the end of 1999, its first drop for a decade since the 1930s. Including reinvested dividends, investors lost 0.9% a year since 1999, the first decade of negative annualized returns in the index’s history stretching back to 1927, according to a S&P analyst.
