MarketView for December 27

Summary

The major equity indexes closed mostly flat on Friday, with the Dow Jones Industrial Average ending six days of consecutive record closing highs. Friday's slight decline also halted the S&P 500's run of four record closing highs in a row. Shares of Twitter fell 13 percent to close at $63.75 after investors took profits. Twitter was among the day’s most actively traded stocks.

Both the Dow and the S&P 500 ended a second straight week of solid gains. The S&P 500 posted its best two-week period since July, while the Dow chalked up its best two weeks since June 2012. The S&P 500 is up 29.1 percent this year, on track for its best year since 1997. The Dow has climbed 25.8 percent this year, on track for its best year since 1996.

Meanwhile the Nasdaq fell 0.25 percent, with Apple down 0.7 percent to close at $560.09 and Facebook down about 4 percent, closing at $55.44. The Nasdaq is up about 37.7 percent this year, making it the best performer among the three major equity indexes.

Sprint ended the day up 8.3 percent to close at $10.79, following speculation that a deal by Japan's SoftBank to acquire T-Mobile is closer to getting done.

For the holiday-shortened week, the Dow gained 1.6 percent, the S&P 500 added about 1.3 percent and the Nasdaq was up about 1.3 percent. The markets were closed on Wednesday for Christmas and trading had ended early on Tuesday.

In company news, Textron agreed to acquire Beechcraft for $1.4 billion in cash. Textron ended the day up 1.1 percent, closing at $36.61.

General Motors joint venture with China will recall close to 1.5 million vehicles because of potential safety issues in one of the biggest recalls in the world's largest auto market. GM ended the day down 1.4 percent to close at $40.94.

Overall volume was light, as it has been all week. Approximately 4 billion shares traded on major equity exchanges, well below the average of about 6.1 billion shares per day this month, according to data from BATS Global Markets.

Wall Street Remains Hopeful

As best year in more than 15 years for the Street draws to a close, few are expecting a repeat performance in 2014, although there is no reason not to feel optimistic. While the markets will likely enter January quietly, the upward trend is seen continuing next week, especially in some of 2013's high-flying names.

Economic growth is expected to accelerate next year, boosting employment and consumer purchasing power. Nonetheless, with the markets repeatedly notching all-time highs that may not translate to market gains as dramatically as in 2013.

The S&P 500 is up 29 percent so far in 2013, its best annual performance since 1997. The Dow Jones Industrial Average .has gained 26 percent while the Nasdaq is up nearly 38 percent. Moreover, the gains have been widespread, with all S&P 500 sectors higher on the year. The weakest group, telecoms rose 6.5 percent while consumer discretionary led the year with a gain of 40 percent.

In addition, the Federal Reserve's stimulus program will not be as strong a factor after the central bank announced a slowing of the program in December. Beginning in January the Fed’s plan is to purchase $75 billion in Treasuries and mortgage-backed securities per month, down from $85 billion, and Fed Chairman Ben Bernanke, whose term expires on January 31, suggested the Fed could continue to slowly reduce that stimulus throughout 2014.

Netflix was the S&P's strongest performer in 2013, with a price increase of almost 300 percent, followed by Best Buy and Micron, both of which climbed nearly 240 percent. Tesla Motors was another standout, rising 346 percent, while Facebook more than doubled in price.

These names could see further upside next week thanks to "window dressing," a practice in which investors buy securities with big gains to improve the appearance of their holdings before presenting the results to clients. The 2013 year will close out on Tuesday, with the market closed on Wednesday for the New Year's Day holiday.

The fourth-quarter earnings season won't start in earnest until the second week of January, but there will be a few clues into the economy's strength coming out next week, with data on consumer confidence and manufacturing.

Next week will also see reads on the housing market with November pending home sales on tap for Monday and the Case/Shiller report on October home prices on Tuesday. The housing sector has been in focus as Treasury yields hit two-year highs, which could put pressure on mortgage rates, which are typically driven by the yield on the 10-year Treasury note.

Pending home sales are seen rising 1 percent, while October home prices are expected to increase by 0.8 percent.