US stocks : Start of 'Santa Claus rally' dampened by 'cliff' worries
Investors are betting Congress will reach a deal to avert most of the austerity measures due to come into force at the start of next year. That has led to the best year for stocks since the post-financial crisis rebound. But those gains may be quickly reversed if a deal is not reached soon.
The S&P 500 index posted its biggest drop in more than a month on Friday as a Republican plan to avoid the cliff - $600 billion in tax hikes and spending cuts that could tip the U.S.
economy into recession - failed to gain traction on Thursday night.
Sharp moves like that highlight how headlines from Washington can whipsaw markets, especially during the thinly traded period over the Christmas holiday.
Still, with the S&P 500 up 0.7 percent in December and on course for its strongest month since September, some analysts are predicting that stocks will find their footing during a market seasonality known as the "Santa Claus rally."
"Right now we've seen some very constructive action in the market so I think that bodes well for this being a positive seasonal 'Santa' period over the coming seven days," said Ari Wald, a technical analyst at The PrinceRidge Group.
He noted an all-time high in the NYSE advance-decline line, which compares advancing and declining stocks, as indication
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