As the Year Ticks Down, Is the Vaunted Rally Here?

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Santa Claus couldn't do it, so it's up to Baby New Year.

The man in the big red suit, who was supposedly scheduled to carry in a year-end rally on his sleigh, brought nothing last week but a 77-point slump in the

Dow Jones Industrial Average

. So the year-capping pop, if there is one, will have to be super-concentrated and very swift.

A surge of some sort appears to be underway this midday, with the Dow having traded steadily in its current range through the morning. Around 12:10 p.m. EST the blue-chip measure was up 113 to 7792, with

AlliedSignal

(ALD)

,

J.P. Morgan

(JPM) - Get Report

and

Chevron

(CHV)

leading the way but no overwhelming standout among the 30 members.

The tech-powered

Nasdaq Composite Index

was up 18 to 1529 behind strength in

Microsoft

(MSFT) - Get Report

and other big tech names, but Nasdaq advancers were only narrowly ahead of decliners (2,037 to 1,938).

New York Stock Exchange

advancers were crushing decliners by 1,976 to 791. As for other major indices, the broad

S&P 500

was up 15 to 951 and the small-cap

Russell 2000

was up 3.50 to 424.99.

Market watchers, bruised and weary after months of madly gyrating stock prices, greeted the morning's action with mild pleasure and considerable skepticism. "I think you have to wait and see how the day ends up, but it definitely looks like we're trying to pull off a year-end rally," said Warren Epstein, head trader at

Richard A. Rosenblatt

. "Banks look good, Nasdaq looks good, but it's early yet. We're getting a lot of mixed signals. I think people want to see a rally, but I'm not sure if we'll get it." He noted that the next couple of days will offer few concrete factors to drive the market.

Charles Payne, head analyst at

Wall Street Strategies

, attributed today's upswing to traders attempting to get in front of an expected big January effect -- the market boost that comes from flush mutual funds and bonus-wielding individuals leaping into stocks at the start of the year. But Payne said he won't be impressed with the rally today, or any other one-day move, until it shows him better evidence of true strength.

"One of the characteristics of the market over the last couple of weeks has been the early rally," Payne said. "But we need to pull all the way back and then rally again into the close. Let's say we were unchanged at 3 o'clock, then came all the way back and closed higher than the intraday high. Until we do that, I'm not going to be very rah-rah."

Like many Wall Street observers in these muddled times, Payne counsels caution as the year gets started. "Unless you're the kind of individual who can take a short-term profit, you kind of want to wait on the sidelines," he said. Those who feel ready to buy now should look to beaten-down names with solid fundamentals, he said, pointing to oil-service stalwart

Schlumberger

(SLB) - Get Report

and Microsoft.

Another featured stock on Payne's list of names to watch:

Eastman Kodak

(EK)

. "Since that's such an oversold stock, you're going to see a lot of speculators pick it up," he said. "It could be one of the top percentage gainers next year, at least as far as the Dow is concerned."