Email2011 ended in remarkable fashion -- remarkable in the sense that the S&P 500 declined 0.43% to close the year almost exactly where it started. What's more is that there was literally a final flush of selling in the last few minutes that proved to be the great equalizer.
If we didn't know any better, we would say someone might have even been gaming the market. That would never happen now, would it?
In the end, the S&P 500 closed 2011 down a mere 0.04 points. That is an astounding statistic when one stops to think of how volatile the market was in 2011. One important thing that statistic doesn't reveal, though, is the benefit of dividend payments.
The S&P 500 may have ended 2011 essentially flat in terms of price, but when dividends are included it ended the year up 2.1%. That may not sound like much, but an extra 2.1% every year can make a big difference over the long term.
The total return distinction gets to the heart of what we emphasized throughout 2011 and continue to believe going into 2012: high-quality, blue-chip stocks that pay a dividend are an attractive investment alternative in this low interest rate environment.
It appears, too, that the blue chips -- and just about most stocks for that matter -- are going to begin 2012 on a strong note, notwithstanding building geopolitical tension in and around Iran that has helped boost oil prices back above $100 per barrel.
The Dow futures are currently up 194 points; the Nasdaq 100 futures are currently up 36 points; and the S&P 500 futures are currently up 20 points.
The bullish bias comes on the heels of none other than better-than-expected economic data. The only difference this time is that the data originates outside the U.S.
Specifically, manufacturing reports for December out of China and the eurozone topped expectations.
China's PMI actually tipped back into expansion territory at 50.3 while the eurozone PMI bumped up to 46.9 from 46.4. A number below 50 implies contraction, yet with all that was going on in December with respect to the sovereign debt crisis, any improvement from November qualifies as a welcome surprise.
The manufacturing data provided a measure of support for markets open in those respective areas and has set a good tone ahead of the U.S. ISM Index for December at 10: 00 a.m. ET (Briefing.com consensus 53.4; prior 52.7). We will also get Construction Spending data for November (Briefing.com consensus +0.5%; prior +0.8%) at the same time.
Separately, the FOMC Minutes from the December meeting will be released at 2:00 p.m. ET. They will draw some added interest with the market continuing to handicap the prospect of QE3 and the impact of the eurozone debt crisis.
In the meantime, the Santa Claus rally, which fell flat last week, is going to get rolling again in a risk-on trade.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
