Wall Street closes 2013 at record highs

Wall Street booked its best year since 1997 as major indices hit record highs after a reported surge in consumer confidence.

With light volume in the final trading session of 2013, the benchmark Standard & Poor’s 500 Index rose 0.4 per cent to close at a record 1,848.36 on Tuesday. The 30-per-cent gain since January 1 was the best calendar performance on the broad-based gauge in 16 years.

The blue-chip Dow Jones Industrial Average was up 0.4 per cent at 16,576.66, another record close. The 30-stock index was up 27 per cent, its biggest January-December rise since 1995.

US consumer confidence surged in December to nearly regain the levels before the October government shutdown, according to the leading monthly survey of consumer sentiment released on Tuesday.

The improvement amid the Christmas shopping season bodes well for retailers, whose performance is often dependent on year-end revenue. Consumer spending accounts for about 70 per cent of the 17-trillion-dollar US economy.

Consumer confidence index

The Conference Board, a New York-based business think tank, had said on Tuesday that this month’s survey, based on polling through December 17, showed its Consumer Confidence Index leaping to 78.1.

“Despite the many challenges throughout 2013, consumers are in better spirits today than when the year began,” Conference Board economist Lynn Franco said.

From 80.2 in September, the index had plunged in October and November to a seven-month low of 72, in the wake of the 16-day October shutdown of non-essential services by the federal government, before Congress resolved its budget stalemate.

The index is set to a 1985 benchmark of 100.

“Consumer confidence rebounded in December and is now close to pre-government shutdown levels,” Franco said.

Consumers were buoyed by “more favourable economic and labour-market conditions,” she said.

Gross domestic product

Third-quarter gross domestic product grew at an annualised 4.1 per cent, according to revised government estimates, the fastest pace in nearly two years.

The S&P 500 added 2.4 per cent in December, its fourth straight winning month, despite the Federal Reserve’s December 18 announcement of the long-awaited taper of its “quantitative easing” policy.

Fed bond-buying programme

After pumping some $1.3 trillion into the bond markets since September 2012, the Fed announced that starting in January it would pare its monthly purchases of government-linked bonds by $10 billion to $75 billion.

In May, global equities markets, including Wall Street, stumbled after Fed chief Ben Bernanke said that the central bank was nearing a decision to pull back on its extraordinary monetary policies.

The S&P 500’s 10 main industries all booked gains for the year, and all but about 40 of the index’s 500 components saw higher share prices, the Bloomberg News reported. Among the Dow 30, only IMB’s stock price was off for the year.

A Bloomberg compilation of 20 Wall Street forecasts had an average 2014 prediction of a 5.5-per-cent rise in the S&P 500.

US financial markets are closed on Wednesday in observance of the New Year.

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