Transcripts

A Cold Start For Stocks

JEFF YASTINE: Stock investors struggled to find their footing today in this first day of December trading. Winter months are typically good ones on Wall Street. But as Suzanne Pratt reports, there are a number of reasons why this December could mean rough going for the stock market.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: After a fairly naughty November, stock investors are hoping for a nice December. But some market pros are concerned that Santa will skip Wall Street this year. Standard & Poor's market strategist Alec Young believes volatility will replace the typical year end run-up in stock prices, known as the Santa Claus rally.

ALEC YOUNG, MARKET STRATEGIST, STANDARD & POOR'S: Santa Claus rally kind of implies that the market makes steady gains throughout the month of December. We don't really see that. We continue to see some choppiness. But considering how bad things were a few weeks ago, I think a lot of investors would be happy with a market that trades sideways for a little while.

PRATT: Young believes investors will hold back because of worries about the credit crunch and a recession in the U.S. economy.

YOUNG: Anything that we get from the government in terms of economic data that reinforces the idea that the economy is weakening would be bad for stocks. Any news on the retailing front that the consumer is ready to pack it in after years of continuing to spend, that that's finally over, that would be bad news for stocks.

PRATT: Others, however, believe a December rally is still a possibility. A look at past history certainly helps to make that case. According to the "Stock Traders Almanac," since 1950, December has been the second best month of the year on Wall Street with the S&P 500 gaining on average 1.7 percent. November has been the kindest month, returning slightly more. Russell Investment Group's Stephen Wood says the December 11th Fed meeting, at which a cut in interest rates is widely expected, could give stocks an added boost.

STEPHEN WOOD, PORTFOLIO STRATEGIST, RUSSELL INVESTMENT GROUP: Is it going to be 25 basis points or 50 basis points? And equity markets are going to like that. So either way, equity markets are going to like it, even though it's inflationary. So I think what you're going to see is the market's moving now ahead of the Fed's cut.

PRATT: In the last four decades, there have only been a handful of years without a Santa Claus rally. But it is interesting to note when Santa has failed to show up, his absence sometimes precedes a bear market. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.