Clerks and traders in the Euro Dollar pit at the Chicago Mercantile Exchange celebrate the New Year at the close of trading on the last business day of the year, December 29. - REUTERS

NEW YORK (Reuters):

When Wall Street returns to work after New Year's Day, stock investors will be in the mood to buy - that is if manufacturing and jobs data show modest growth.

After the U.S. stock market's surge in 2006, there may be an inclination to sell some shares and take profits early next next week, said Muriel Siebert, the founder and president of Muriel Siebert & Co., a discount brokerage based in New York.

"It's only a three-day week. Since we've had such a powerful market, you could see people taking profits," said Siebert, who was the first woman to own a seat on the New York Stock Exchange.

Some clients who are retired have said they will examine their portfolios over the weekend to see which stocks to sell "so they start the year off with a cushion," she said.

But Siebert believes that pension funds and other investors will be shopping for equities next week.

"There's fresh money that comes in at this time of year," she said. "There's just so much money sloshing around. The hedge funds and the private equity people have put so much money into this market."

The U.S. stock market will be closed on Monday, January 1, for New Year's Day, and on Tuesday, January 2, to observe a national day of mourning for former President Gerald Ford, who died earlier this week.

FRIENDLY NUMBERS

U.S. stock exchanges will resume trading on Wednesday. The Institute for Supply Management will release its December manufacturing index on January 3 at 10 a.m. EST (1500 GMT).

On Friday, the crucial monthly nonfarm U.S. payrolls report for December will be released at 8:30 a.m. EST.

"The best-case scenario for the market would be for it to continue to get data that is moderate - not too slow, to bring the economy into recession - and not too strong, to bring the Fed back into tightening mode," said Keith Hembre, chief economist for First American Funds, a Minneapolis-based mutual fund group with about $70 billion in open-end funds.

"You're talking about data that's walking the line," Hembre said, adding that an ISM reading of 51 or above for December manufacturing activity would be "negative for the market because it would put growth back to a level that's too strong."

A reading below 49 would worry Wall Street because it would indicate the economy is weaker than expected, he added.

Economists polled by Reuters see the ISM's December manufacturing index at 49.9, just above November's 49.5 and a tick below the 50 threshold that separates expansion and contraction.

December nonfarm payroll growth is estimated at 110,000, according to economists participating in the Reuters poll. That would fall below November's reading of 132,000. The unemployment rate is forecast at 4.5 per cent, unchanged from November, while average hourly earnings are pegged to go up 0.3 per cent, not far above November's gain of 0.2 per cent.

"If we get about 100,000 jobs in December, or maybe just a touch below, and a stable unemployment rate, that's a pretty favorable number," Hembre said. "That could stimulate trading.

"A lot of people will be coming back from vacation and they will be eager to put money to work," he added.

A YEAR TO REMEMBER

On Friday, the blue-chip Dow Jones industrial average closed at 12,463.15 - up 16.3 per cent for the year. On the day, the Dow was down 0.31 per cent, though it finished the week up one per cent.

The Standard & Poor's 500 Index ended at 1,418.30 - up 13.6 per cent for 2006. The S&P 500 slipped 0.45 per cent on Friday, but ended the week up 0.5 per cent.

The Nasdaq Composite Index finished at 2,415.29, up 9.5 per cent - or roughly 10 per cent, if you're a double-digit fan - for 2006. The Nasdaq declined 0.42 per cent on Friday, but closed out the week with a 0.6 per cent gain.

"Before you can talk about 2007, you've got to talk about 2006. The way it's ending is beautiful. Everything is rising toward its highs," said Ralph Acampora, managing director and technical analyst for Knight Capital Group, a Nasdaq market maker and elec-tronic trading powerhouse in Jersey City, New Jersey.

All-time intraday peak

Earlier in the week, the Dow closed above 12,500 for the first time. On Thursday, it hit an all-time intraday peak at 12,529.88.

Acampora, whose Wall Street career spans 40 years, is famous for accurately predicting the Dow's rise to 10,000 in 1999 when he was with Prudential Securities.

By the time 2007 ends, Acampora sees the Dow between 14,400 and 14,600, while he believes the S&P 500 will be over 1,600 and the Nasdaq will be at 3,000 or above.

Only two S&P 500 companies will report earnings this week: Monsanto Co., known for its genetically-engineered seed brands and herbicides, will report first-quarter results on Thursday; and Constellation Brands Inc., whose brands include Robert Mondavi wines, Paul Masson brandy and Corona beer, will give its third-quarter scorecard on Thursday.

"Something beautiful happened in the last six months," Acampora added. "For the first time in four years, all the old-line stocks are starting to come back - Time Warner, Citigroup, General Electric, Coca-Cola, Avon Products, Campbell Soup, Heinz, Xerox and even Microsoft ... All of a sudden, vintage stocks are back in style."

Why? "There's just so much liquidity out there," he said. "You see it in IPOs, private equity, bonds. You're looking for where there's value."

James D. Hardesty, president of Hardesty Capital Management, which has about $650 million of assets under management, said: "We're coming to the year of the big-cap stock. They've been out of favour so long. Their earnings are good. We think earnings are going to be very good in 2007. We see operating earnings for the S&P 500 up 7 per cent to 9 per cent."

He likes "sleeping beauties," such as GE, Microsoft, Procter & Gamble Co. and Caterpillar Inc., which are among Hardesty Capital's major holdings.

He also said he may sell some shares of Goldman Sachs Group to take some profits from its run up this year to nearly $200 a share.

"We're bulls," Hardesty said. "We think interest rates have peaked. The next direction is down, possibly in the second half of 2007."

IT'S ALL ABOUT OIL

One caveat for the coming year, however, is the price of oil, Siebert noted.

"If oil stays where it is, then I think the increase in mortgage payments from the I-O's (interest-only) and adjustable-rate mortgages will not be as difficult for people," she said. "Our economy is pretty strong."

On Friday, NYMEX February crude oil settled at $61.05 a barrel - just a penny above crude's 2005 closing price - but down 22 per cent from its July peak at $78.40.

"Oil is key because it triggers inflation," she said. "Oil goes into everything. It goes into gasoline and it goes into each can of canned goods you buy because it's delivered."