By Margreet Dietz
A year that few investors would care to describe as steady is set to end with the major stock indexes on both sides of the Atlantic just about where they started it.
Last Friday, the broad Standard & Poor's 500 index broke through its 200-day moving average, ending the day with a 0.6 percent advance for the year, according to Reuters.
Ahead of the Christmas break, equity markets were lifted by signs of further strength in the American economy. For the five days ended Dec. 23, the Standard & Poor's 500 Index rose 3.7 percent, the Dow Jones Industrial Average advanced 3.6 percent and the Nasdaq Composite Index added 2.5 percent. Wall Street returns to action on Tuesday morning in New York though the volume of trading is expected to remain thin until the new year.
Ari Wald, a technical strategist at Brown Brothers Harriman, told Reuters that the key level on the S&P 500 is 1,260. The index closed at 1,265.33 on Friday.
"A breakout above this supply would argue for continued seasonal strength through the first quarter of 2012," Wald said.
Investors will be looking for the latest clues confirming that the recovery of the world's largest economy is on track. On Tuesday, reports may show home prices in 20 US cities fell at a slower pace and consumer confidence rose to a five-month high, according to Bloomberg News.
Last week, separate reports indicated strength in orders for US durable goods in November, as well as sales of new homes and new unemployment claims.
“The US economy is improving more than expected,” Hideyuki Ishiguro, assistant manager at the investment strategy department at Okasan Securities in Tokyo, told Bloomberg News. “Pessimism is easing among American consumers due to a recovery in the job market and some stability in the stock market.”
Investors will also watch the Chicago Purchasing Managers Index and pending home sales data, both due on Thursday.
The holidays will provide a short respite for the eurozone. No credit rating agencies are expected to act at least until the new year has begun. Standard & Poor's is expected to release its verdict on debt ratings for 15 euro zone countries in January, two independent European government sources told Reuters.
Italy will sell 3- and 10-year bonds on Thursday, and a successful auction would give the euro some support.
The Stoxx 600 Index had a 0.9 percent increase on Friday, bringing gains for the week to 3.5 percent. Stocks exposed to the US economy paced the advance.