MARKET CALL: Did Santa Come Early To Wall Street? Is He Leaving Now?

We've been monitoring the relationship between the S&P 500's ytd performance versus its comparable average of the past 10 years (chart). This year, the index has been much more volatile than the average and has outperformed the average by about five percentage points since early August. Does this mean that the traditional Santa Claus rally started early this year and is over already? Over the past 10 years, the Santa rally has added about four percentage points to the average annual percentage gain of the S&P 500 during November and December.

Much will depend on investors' assessments of the credit markets. They were spooked last week (just ahead of Halloween) by news that Zions Bancorp incurred a $50 million charge-off in Q3 due to legal actions against two borrowers. Stock prices dropped sharply on Thursday, led by the KBW Regional Banking ETF (chart).