Demand for small-cap stocks is increasing relative to established large-cap names, a divergence that signals continued risk appetite among investors.» Read More
As China welcomes the Year of the Horse, investors may want to note that historically it hasn't been the friendliest for stocks.
China's Lunar New Year, or Spring Festival, begins Friday, marking the start of the year 4712.
U.S. stocks are on pace to close a volatile January in the red, after posting the best yearly gain in 16 years.
With less than two hours until the end of trading Friday, the S&P 500 was trading around 1790, down just over 3 percent for the month. It is on track for its first January loss since 2009, and the largest monthly decrease in eight months.
Similarly, the Dow is off by almost 5 percent this year, while the Nasdaq has fallen 1.5 percent.
As January goes, so goes the year?
After a temporary drop in the last six weeks of 2013, short interest is back on the rise.
The NYSE reported on Monday that short interest rose to 13.8 billion shares in the first half of January from 13.41 billion on December 30, a 2.98 percent increase – the biggest such bi-weekly increase since mid-June of last year.
Likewise, Nasdaq also showed a modest increase of 0.5 percent in short interest during the same period. As of mid-January, short interest rose to about 7.62 billion shares, compared with 7.58 billion shares as of December 31.
(Read more: Betting against Apple? Not so fast: Ex-CEO Sculley)
Short interest measures the total number of shares of a security that has been sold short, expressed as a percent of total tradable shares.
Investors track short-interest levels to gain a sense of where a stock might be headed, along with some insight into whether any positive news might force short traders to cover their positions, pushing stocks higher.
Here is a look at the most heavily shorted stocks:
If history is an indication, the stock market could extend its rally into 2014.
U.S. stocks are up for a sixth-straight session, with the Dow gaining 3.4 percent, or its strongest six-day win streak since March 2012. So far this year, the S&P 500 is up 29 percent, on pace for its best yearly performance since 1997, while the Dow is up 25 percent, or its biggest annual gain in a decade.
The Dow Jones Industrial Average is on track to end the year with its biggest percentage gain since 1996 and is almost certain to have its best year in a decade.
If it closes on Dec. 31 above 16,422.11, the Dow will beat its 25.32 percent surge in 2003.
That would make it the best year since 1996, when the Dow gained 26.01 percent.
As the S&P 500 continues to trade near record highs, short interest appears to be on the rise, again.
NYSE Euronext reports short interest rose more than 1.53 percent in November to 27.84 billion shares, its largest amount in five months.
Just in the last two weeks of November, more than 43 percent of S&P 500 stocks saw an average 10 percent increase in short interest.
This year has not been kind to short sellers, which have seen the S&P jump 24 percent, or its largest gain in a decade.
But some investors believe the tide may change. Hedge fund manager Bill Fleckenstein recently told CNBC he was restarting his short fund, while hedge fund titan Jim Chanos said he's finding many more opportunities on the short side.
The latest employment figures show the economy added 203,000 jobs in November, while the unemployment rate dropped 30 basis points to 7 percent, the lowest level in five years.
Economists expected the jobs numbers to increase by 180,000 and unemployment to dip by 10 basis points.
With a downtick in the unemployment rate, the labor force participation rate, a measure of both people who are working and those who are actively looking increased by 20 basis points to 63 percent, it's highest level in more than a year. The 30-year average stands at around 65.8 percent.
At the same time, the employment-population ratio, which measures the percentage of adults over 16 who have a job also increased by 30 basis points to 58.63, the biggest such increase since September 2012.
The Federal Reserve pledged to keep interest rates low until the unemployment rate drops to 6.5 percent or lower, as long as inflation remains near the 2 percent target.
The current downward trajectory of the unemployment rate may now provide a catalyst for the Fed to put the brakes on its historic expansion of monetary policy by tapering its massive bond-buying program initiated more than five years ago.
Below is a look at where the most jobs are being added. Education and health services had the largest increase, adding 40,000 jobs last month.
A strong sell bias continues among company insiders across the market, as stocks breach trough historic levels.
The S&P 500 is up 26 percent year-to-date, tracking for its best yearly gain in a decade. Other market indexes such as the Nasdaq, Russell 2000 and Dow transportation average are up more than 32 percent this year, respectively. The S&P, Dow, Russell and transports are trading at or near record highs, while the Nasdaq crossed the 4,000 mark for the first time in 13 years.
As the market continues to gain steam, corporate insiders are unwinding their positions at a similar rate. Research firm InsiderScore highlights that the sentiment being displayed is not surprising given the market backdrop along with tax season approaching, but emphasizes that investors should not lose sight of the trend and continue to drill down on individual companies.
If history is an indication, the stock market could extend its rally into December.
U.S. stocks finished the shortened-holiday week with another gain, up for eight consecutive weeks. The S&P 500 set its longest winning streak in nearly 10 years, while it was the Dow's longest consecutive weekly increase in three years. Both indexes are up 6.8 percent and 6.7 percent, respectively, in that period.
Since the 1900s, December is the best month for the Dow, and second-best month for the S&P 500 and Nasdaq. Historically, all three indexes have gained on average between 1 and 2 percent, respectively.
Even with the sharp gains in stock prices this year, 70 percent of the Dow components still offer dividend yields greater than 2 percent.
Thirteen of the 30 companies in the Dow have dividend yields greater than the 10-year U.S. Treasury, which was yielding around 2.7 percent Tuesday. The current average dividend yield of the Dow stands at 2.52 percent as companies kept pace with stock prices by raising dividends, but the average is down about 40 basis points from the beginning of the year.
Since then, the Dow is higher by about 3,000 points, which has pushed yields lower.
"Investors need to be cautious and look at valuations along with dividend yields," says Art Hogan, Chief Market Analyst at Lazard Capital Markets. "I expect the market to continue its run, and potentially rise another 12 percent next year, but I am still focused on fundamentals."
The Dow Jones Industrial Average is up nearly 23 percent year-to-date, on pace for its largest gain in a decade. The Dow, closed at a record 16,072.54 Monday, scoring its 42nd record close this year.
Hogan also favors stocks over bonds, and highlights that with corporate cash on balance sheets at record levels, the trend in capital distribution in the form of dividends and stock buybacks should continue. Companies, using record low bond yields to issue debt, have been using the proceeds to issue dividends and buy back stock.
Twenty-four Dow members, or 80 percent of the index, increased their dividend payments so far this year, according to figures by S&P Capital IQ. Some of those names include: Verizon, 3M, American Express, Caterpillar, Chevron, Cisco, among others.
But as Hogan highlights, investors shouldn't worry about just chasing yield and should first make sure the underlying fundamentals justify the price.