Stocks to Kick Off New Year in Strong Fashion

It’s the first day of trading in the new year and investors kick off 2012 hoping it will be better and smoother than 2011.  Despite the wild fluctuations on Wall Street last year, the broader market ended flat.

The first week of January can be crucial for stocks, as lots of new money comes into the market. Many investors heed an old Wall Street saying, “As goes January, so goes the year.”  Data show that since 1945, if the market ends higher in January, it finishes the year higher 88% of the time.

Futures trading this morning suggests a dramatic move to the upside when the first opening bell of 2012 sounds on Wall Street.

It’s a data-packed week; national manufacturing numbers for December are due out Monday, as are the minutes from the Federal Reserve’s latest policy-setting meeting.  Auto sales for December come tomorrow morning, and the big government jobs report comes Friday.  Economists expect around 150,000 jobs were created last month.

While there’s optimism for stocks and economic growth this year, many risks remain. Peter Morici, professor at the University of Maryland, points out the following challenges to U.S. growth in 2012:

  1. China faces real challenges--falling property, questionable accounting standards and banks stuffed with bad loans.”
  2. “U.S. banks remain troubled and are not lending money to small and medium sized businesses...”
  3. Oil prices are spiking.”
  4. “ Europe is in deep trouble. The crisis has not passed and if the right steps are not taken, European banks, which are burdened with a lot of Italian, Greek, Spanish and other government debt, will start failing.”

The European debt crisis certainly rattled European stock markets last year.  The German DAX lost 15%, Paris’ CAC 40 lost 17%, and London’s FTSE was off 5.5%.

By comparison, the Dow Jones Industrial Average rose 5.5% last year and was higher for the third year in a row.

Meanwhile, the holidays are officially over but the gimmick-named shopping days are not.

UPS (NYSE:UPS) has coined today “National Returns Day.”  The nation’s largest shipper expects to move a record 555,000 items on National Returns Day.

Online holiday purchases grew 15% last year compared with the year before, while returns are expected to increase by less than 8%.