Though many Wall Street participants took a holiday
hiatus, stocks still managed a string of record closes and a win last week.
Prices eased slightly on Friday, but the major indexes gained over 1% in a short
trading week.

Prior to Friday, the stock market had closed at
all-time highs for six consecutive sessions. There were few players on the
scene, low volumes, little in the way of economic data, and corporate news flow
was light, but “stocks are acting like they are in a race to the finish
line,” says Fred Dickson, chief investment strategist at D.A. Davidson.
“It was a textbook Santa Claus rally week.”

The Dow Jones Industrial Average advanced 1.6% or
257 points, to 16,478.41. Friday, the average eased slightly, but it remains up
26% on the year. The Standard & Poor’s 500 index rose 1.3% or 23 points to
1841.40. The Nasdaq Composite index picked up 1.3% or 52 points, to 4156.59.

To some extent last week, economic sentiment might
have been boosted by what’s turning out to be a good Christmas retail season,
says Douglas Coté, Chief Market Strategist at ING U.S. Investment Management.
There was heavy media coverage of overwhelmed package-delivery companies, a
“problem” that suggests the economy is busy, Coté says. Additionally,
the stock market seemed to take in stride the move in the 10-year Treasury bond
yield over the psychologically important 3% level, he adds.

The market’s fourth-quarter “gangbusters”
10% rise is capping off a powerful year that could potentially draw back
individual investors, who have missed most of the rally from 2009 lows, Coté
says. Expectations that stock prices will rise over the next six months jumped
7.6 percentage points to 55.1%, the highest in three years, according to the American
Association of Individual Investors’ latest survey.

From a technical point of view, says Dickson, the
rally looks stretched, based on a number of metrics. The thrust has been big
and quick and “usually what happens is a pause or small pullback short
term,” he says, after this kind of move (Source:  Barrons Online).