Ahead of Wall Street - December 30, 2011 - Ahead of Wall Street

Friday, December 30, 2011

Given the absence of any market-moving reports, both here and in Europe, the year's last trading session today will likely be a quite one. But light trading volumes have a way of producing outsized moves in either direction. Thursday's gains were accompanied by volumes that were half of a normal trading session and we will likely see even less activity today.

If there is any suspense in today's session, it is with respect to the final performance tally for the individual market indexes. As of Thursday's close, the Dow is the best performing, with the S&P 500 and Nasdaq roughly at levels where they started the year. With the Dow's win effectively guaranteed at this stage, the only question is whether these two indexes will remain in the positive column. I am confident that we will build on yesterday's gains to finish the year clearly in the positive category.

Today's only economic news is out of China that shows that manufacturing activity in December remained in contractionary territory, though the reading was a modest improvement over the November level. The HSBC Purchasing Managers Index for China showed a reading of 48.7 in December, up from November's 47.7 level. Readings below 50 indicate contraction in the manufacturing sector. The official Chinese PMI reading comes out this Sunday. The HSBC version has been in contractionary territory for the last few months, while official reading went below the 50 level for the first time last month. We get the U.S. manufacturing ISM report next week.

A major question that the markets will be grappling with in the New Year is the growth momentum in the Chinese economy. The consensus view is that the country will be able to engineer a so-called soft landing. This means that Chinese growth will drop from the over-10% pace of the last few years to somewhere in the 7% to 8% vicinity in 2012. The country's immense financial firepower gives its leaders a very high level of flexibility in responding to the economic slowdown. As such, the consensus view reflects a sound and rational basis. But the Chinese growth question will nevertheless be a major concern in 2012.

In closing, I wish all of you a very happy and prosperous New Year .

Sheraz Mian

Director of Research

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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