Bleary-eyed investors return from New Year's to a week light on news, heavier on influence.
December 31, 2004: 8:22 PM EST
By Alexandra Twin, CNN/Money staff writer
NEW YORK (CNN/Money) - Wall Street heads back to work next week, in what promises to be a low-key, if potentially influential five days for the stock market.
Bleary-eyed investors still recovering from New Year's festivities can take comfort in a light week for news.
Fourth-quarter earnings from big cap companies don't start creeping in until later in the month, and the week's biggest economic report -- the December jobs report -- isn't due until Friday.
But for those who follow the seasonal patterns of the stock market, the first five sessions of a new year are key, particularly if the market should see a rise.
According to the Stock Trader's Almanac, since 1950, when the S&P 500 index rose during the first five days of the year, the index ended up closing out the year higher 85 percent of the time. When the index fell during the first five days, the market split the difference, ending higher half the time and ending lower half the time.
The fact that this is the first year since an election makes it more complicated.
Post-election year "first five days" tend to be down more often than up, which could mean next week is a downer.
"You could see a bit of a correction in early January on the stocks that have done really well in this end-of-2004 rally," said Timothy Ghriskey, chief investment officer at Solaris Asset Management. "Otherwise, you might see a quiet period."
If the whole month of January proves to be a down one for the S&P 500, history says the year will be a down one too.
According to the Almanac, every down January on the S&P 500 since 1950 led into a new or extended bear market, or at the best, a flat market.
But January also tends to be a good month for stocks.
"I think you will continue to see a fundamental uptick in the economy and that will transfer to a good period for equities," said Douglas Altabef, managing director at Matrix Asset Advisors. "There also tends to be a lot of pension money coming into the market during January and that is good for equities," he added.
2004, stocks rise again
Investors certainly start the first week of 2005 on an up note, at the end of an ultimately positive year for stocks. After a sluggish first nine months, the stock market managed to pull it together in the last quarter of 2004, marking the second year in a row that the market rose.
The major gauges essentially gained from around mid-October through the end of December, as the presidential election passed without incident and oil prices peaked.
In 2004, the Dow rose 3.3 percent, the S&P 500 rose 9.1 percent and the Nasdaq rose 8.7 percent. (For CNN/Money's year-in-review special, click here.)
"What we'll be focused on in early January will be more reports on how the holiday season went for retailers," Ghriskey added.
Retailers start confessing in earnest late Wednesday and early Thursday of this week, reporting their December same-store sales, or sales at stores open a year or more.
Generally, luxury retailers are expected to have done better than their discount chain counterparts. However, investors won't really get the full picture on the holiday season until later in January, due to the staggered redemption of retail gift cards.
As for the week's big monthly employment report, "the monthly payrolls number will be influential only if it's a huge disappointment," Altabef said.
Key events in the week ahead
The December manufacturing index from the Institute for Supply Management (ISM) is due Monday. The index likely rose to 58.5 from 57.8 in November, according to a consensus of economists surveyed by Briefing.com.
The report on factory orders for November is due Tuesday. Economists expect orders to have risen 0.8 percent after rising 0.5 percent in October.
The ISM's read on the services side of the economy is due Wednesday. The services index is expected to have fallen to 61.0 in December from 61.3 in November.
Friday brings the biggest economic report of the month, the December jobs report. Employers are expected to have added 175,000 jobs to their payrolls, after adding 112,000 in November. The unemployment rate is expected to hold steady at 5.4 percent, unchanged from November.
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