Last week the market paused to digest some of the gains since late October. A much needed round of profit-taking sent all of the key indexes lower, led by the NASDAQ, which fell 20 points, or 0.9%. Still, the Index is up 6.2% for the year. The Russell 2000, the leading index again this year, reflecting the strength in small cap stocks, fell 1.6% last week, but is still up 13.5% for the year. The S&P lost 3 points, but is still up 6.8% for the year. Finally, the Dow declined 49 points, leaving it up less than 1% for the year.

Has the Santa Claus rally already occurred? Last week's sluggish action may be indicating just that. From the recent low on October 22nd until December 3rd, the S&P 500 Index rallied 9.3%, which would be a respectable gain for an entire year. Despite another 4.3% decline in oil prices, falling bond rates and a rising dollar last week the indexes were unable to gain ground. This could suggest that the rally since October may be over. However, the month of December often has paused mid-month, before closing the year strongly. On average stocks are up 1.5% over the last five trading days of the year and first two days of January.

The all important Semiconductor Index (SOX), which is a necessary component of a year-end tech rally, fell nearly 5% last week, as disappointing mid-quarter updates from the two largest manufacturers of programmable microchips, Altera (ALTR) and Xilinx (XLNX) sent the sector lower, offsetting a better than expected earnings report from National Semiconductor (NSM). This pullback could present a favorable entry point, as the SOX held its initial test of its 50-day moving average. Resistance is likely at 435, which is the 200-day moving average, where the index failed twice in the last two months.

What can investors expect this week? Earnings announcements will increase, as Oracle (ORCL) reports results before the market opens on Monday. Wednesday morning, Lehman Brothers (LEH) and homebuilder Lennar Corp. (LEN) post profits. After the close, Bed Bath & Beyond (BBBY) reports results. Thursday morning, Goldman Sachs (GS) and Apollo Group (APOL) release earnings. After the close, Nike (NKE), Adobe Systems (ADBE) and KB Home (KBH) release results. Agilent Technologies (A) holds an Analyst Day beginning Monday morning. ITT Industries (ITT) announces fiscal 2005 guidance on Tuesday before the market opens. Merck (MRK) provides a business update on Tuesday, while General Electric (GE) meets with analysts. On Wednesday, Honeywell (HON) provides an outlook for 2005. Thursday evening, the Semiconductor Book-to-Bill will be released, which is expected to impact the trading of chip equipment makers.

The focus will also be on this week's meeting of the Federal Reserve Open Market Committee, which is expected to announce Tuesday afternoon a 25 basis point increase in interest rates. Investors will be looking at the Fed's commentary, hoping that if they need to raise rates in the future, they will do so at a measured pace. On Monday, November Retail Sales will be released. Tuesday, Industrial Production and Capacity Utilization will be reported for November. Wednesday, the NY Empire State Index for December will be announced, along with weekly oil and gas inventories. Thursday, November Housing Starts and Building Permits will provide a read on the strength of the housing sector. Weekly Jobless Claims and the Philadelphia Fed Survey for December complete the day's data. On Friday, the November CPI will be released.

Stay Tuned!