Retail stocks could stand out in Santa Claus rally

By Ryan Vlastelica

NEW YORK, Dec 9 (BestGrowthStock) – This year’s miracle won’t be
limited to 34th Street. It will spill onto Wall Street as
well.

The recent agreement to extend the Bush-era tax cuts will
help lift the markets in the final weeks of December, analysts
say, with retail stocks expected to be among the top
beneficiaries.

Late-year advances, known as “Santa Claus rallies” because
of their proximity to Christmas, occur on a seasonal jump in
bullish sentiment, as well as window dressing — a strategy
used by fund managers to improve the appearance of their funds
by chasing strong performers.

It helps that stocks are already on an uptrend, with the
Standard & Poor’s 500 Index (.SPX: ) trading at two-year highs.

Increased sentiment “is not totally uncommon at this time
of year,” said William Delwiche, an investment strategist at
Robert W. Baird & Co in Nashville. “Year-end and holidays tend
to make people cheerful and optimistic about the new year.”

The gains, which can be amplified by the period’s light
trading volume, have helped make December an historically
strong month.

According to Thomson Reuters Datastream, the S&P 500 has
gained an average of 1.5 percent in December since 1975, the
third-best month behind April and November. The index is up 5
percent so far this month.

“Santa Claus rallies don’t come on specific catalysts so
much as an intangible sense out there, and this year that
sense is strong and to the upside,” said Joseph Greco,
managing director at Meridian Equity Partners in New York.

For an analysis of how December was expected to fare, see
[ID:nN24243512]

“The tax deal gave us a huge shot in the arm, we’re seeing
consistent strength in retailers, and it’s possible that we
could get a move of 2.5 (percent) to 3 percent up from here,”
Greco said.

NICE COMEBACK FOR THE CONSUMER

Sentiment on retail stocks has been bullish lately, thanks
to encouraging reads on consumer spending in the holiday
shopping season. Analysts said the tax deal is adding to that
positive bias.

“For the first time in several years, the consumer is back
in play, especially if the tax deal comes through the way it
has been proposed,” said Timothy Harder, chief investment
officer at Peak Capital Investment Services in Denver, which
has about $600 million in assets under management. “As that
becomes more certain, companies that target consumers will see
that benefit.”

While Santa Claus rallies unofficially run in the final
week of the year, some retailers have already racked up strong
gains. Abercrombie & Fitch (ANF.N: ) has surged 11.3 percent in
December so far, while luxury retailer Saks Inc (SKS.N: ) is up
6.8 percent.

Despite an expected positive end to the year, issues may
resurface in January as traders return from vacation and
trading volume increases.

“We’ll see Santa in December, but then comes the ‘January
effect’ when institutions and managers either take money off
the table or really get involved,” Meridian’s Greco said.

According to Datastream, January is historically the
fourth-best month of the year.

“I’m hopeful that once they get a read on how bullish
things are, that’ll stimulate them to keep things going.”
(Reporting by Ryan Vlastelica; Additional reporting by
Rodrigo Campos; Editing by Jan Paschal)

Retail stocks could stand out in Santa Claus rally