U.S. stocks extend record run in final 2013 session

New York (Dec 31)   U.S. stocks prepared to end 2013 on a high note pushing the Dow Jones Industrial Average and the S&P 500 to intraday records and leaving the indexes on track for the biggest annual percentage gains since the 1990s.

The S&P 500   rose 6 points, or 0.3%, to 1,847 contributing to a 29.5% rise for the year and leaving it on track for its largest annual percentage jump since 1997. The Dow industrials  added 44 points to trade at 16,548, a day after the index notched its 51st record close of 2013. The blue chips are on track for an annual rise of more than 26%.

The Nasdaq Composite, meanwhile, advanced 20 points, or 0.5%, to 4,174. The index is up more than 38% over the course of 2013, which would be the biggest rise since 2009. The strength of the 2013 rally caught most market prognosticators by surprise.

The previous year saw investors fretting over numerous events, from the presidential election to the impending fiscal cliff and Europe’s debt crisis. With the election in the rearview mirror, policy makers averting a disastrous fiscal mistake and Europe appearing to be slowly on the mend, the stock market in 2013 likely captured some of the returns that would otherwise have been produced in 2012, said Stuart Freeman, chief equity strategist at Wells Fargo Advisors in St. Louis.

The S&P 500 advanced 13.4% in 2012, according to FactSet.

While the market’s strong finish into the end of the year has investors worrying that a pullback may be overdue, Freeman sees little threat for a January pullback. Fourth-quarter earnings are likely to top expectations and the market seasonally performs well in the January-to-May period, in part due to flows to retirement accounts.

Investors in 2014, however, are likely to see a “bumpier ride,” he said.

“Our position is the year will bring a much more moderate return and more volatility,” Freeman said.

Meanwhile, U.S. economic growth and job creation appear likely to continue slowly gaining momentum, providing room for increased capital spending, while a further recovery in Europe will also aid large-cap firms with heavy international sales exposure, he said.

Freeman said he expects large-cap cyclicals to take over leadership in 2014 after outperformance by mid- and small-cap firms in 2013. Wells Fargo has overweight recommendations on the industrial, consumer discretionary and technology sectors, while underweighting utilities and health care.

Volume is expected to remain thin on Tuesday. Stocks will see a full day of trading, but markets will be closed Wednesday for New Year’s Day.

The economic calendar remained light. The S&P 500 added to gains after the Conference Board said its consumer confidence index rose more than expected to 78.2 in December from a revised 72 in November.

Earlier, stock-index futures were little budged by a 0.2% rise in the Case-Shiller home-price index for October. Stocks trimmed gains slightly but remained in positive territory after the Chicago Business Barometer, a gauge of business activity in the region, fell more than expected in December but remained strong overall.

The index dropped to 59.1% in December from 63% a month earlier. Economists had expected a reading of 61%. Any reading above 50% indicates expansion.