In a session that seemingly did little to resolve the ongoing debate about the market's near-term future, major market averages overcame early declines but failed to sustain either a midday rally or a late-session push, ending marginally higher. The Dow Jones Industrial Average closed up 0.2%, to 8589.07 after trading as low as 8487.53 and as high as 8625.89. The S&P 500 ended up 0.1%, to 909.94 vs. its intraday low of 896.39 and high of 909.97, while the Nasdaq Composite finished up 0.4%, to 1396.51 after trading as low as 1377.71 and as high as 1407.15. Aside from some early fireworks on the downside -- prompted mainly by geopolitical concerns after the interception in the Arabian Sea of a North Korean tanker laden with Scud missiles -- and subsequent midmorning recovery, the session was largely uneventful. Indeed, trading volume was lackluster again, with just 1.24 billion shares exchanged on the Big Board. Reflecting the quasi-holiday atmosphere on Wall Street, much of the focus was on economic reports due Thursday, especially the November retail sales data, for which economists forecast a rise of 0.3% overall and 0.2%, excluding autos. Concerns about consumer spending were enhanced by lowered guidance/cautious comments from consumer-product makers Kimberly-Clark ( KMB), Sara-Lee ( SLE) and Yum! Brands ( YUM). Expectations for a weak retail sales report were credited in aiding Treasuries, although trading volume in fixed income also was sparse. The price of the benchmark 10-year rose 12/32, to 100, its yield falling to 4%. The market's state of limbo was further reflected in the latest Investors Intelligence survey, where bullish sentiment fell to 50.5% from 51.1% last Wednesday. The fall in bullish sentiment is considered a positive, because sentiment is often a contrarian indicator. But bullishness remaining over 50% is relatively high, and thus a negative. Bearish sentiment also fell, to 24.2% from 25% the prior week.
Still, in sum, there were plenty of fundamental reasons for the market to stumble, and it didn't. That's either a bullish sign of the market's ability to absorb bad news, or traders' refusal to acknowledge reality. It all depends on your perspective. Personally, I still think the market will move higher into year-end and early 2003, as it continues to mirror the pattern of late 2001. That said, I'm uncomfortable being in the same camp as some folks on a certain financial TV news outlet, who -- on a relatively slow news day -- breathlessly and endlessly reported on the market's historic strength in late December-early January, as well as the potential for pension fund rebalancing to aid the market in 2003. I'm hard-pressed to recall these folks warning that any of the past three years would be negative for stock proxies.