Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
Stocks closed out 2013 characteristically strong, setting yet another record high as all three indexes made solid gains. The S&P 500 and Dow Jones Industrial Average (^DJI 0.44%) both moved up 0.4%, and the broad-based index ended up 30% for the year, the best year it's had since 1997. The Dow, meanwhile, was not far behind, gaining 26.5% over the past 12 months. The gains were driven by a recovery in the housing market, the Federal Reserve's decision to continue pumping $85 billion a month into the economy until two weeks ago, and the addition of more than 200,000 jobs in each of the past two months. According to some analysts, the stock market is overvalued, but with interest rates still low, investors are likely to continue to favor stocks over bonds, at least in the near term. The S&P 500's consumer discretionary sector was the biggest winner of the year, climbing 40.4%, while Netflix (NASDAQ: NFLX) led all S&P 500 stocks with a gain of 295% over the year. Less than 8% of the index's stocks finished down in 2013.
Not surprisingly, trading volume was light on New Year's Eve, a day before the market closes for the New Year's holiday. A consumer confidence report from the Conference Board helped lift stocks today as its survey showed confidence levels improved to 78.1, up from the 72 recorded in November, and better than expectations. Improvements in hiring seemed to be the main driver for the gains. Since consumer spending represents 70% of the economy, increasing confidence is a key factor in driving further economic growth.
One stock making waves today was Hertz Global Holdings (HTZG.Q), whose shares jumped 10% as the company adopted a one-year shareholder right's plan, also known as a "poison pill" to defend it against a potential hostile takeover. Hertz's board said the decision was made because of "unusual and substantial activity in the Company's shares" to help it focus on initiatives including the integration of Dollar Thrifty, expanding the rental-car company's off-airport presence, and introducing new brands. Oftentimes, the poison pill defense is adopted to protect the company from activist shareholders, but none has been particularly vocal on Hertz recently. Trading volume in the stock has been light recently, though the board said they've seen a spike in options trading activity. Shares gained more than 75% on the year.
