A Modest Year

But many stocks have not gained much after buyback announcements. For example, Reston-based home builder NVR Inc. said in November that its board had authorized a $300 million share repurchase. NVR's share price is up about 2 percent since the announcement. Microsoft Corp. bought back about $9 billion in stock in 2005, according to TrimTabs. But Microsoft's share price is nearly unchanged for the year.

Experts said the modest returns indicate that investors did not embrace buybacks as much this year as they have in the past. Investors typically view buybacks as an indication that corporate executives are enthusiastic about the future and believe shares in their firms are undervalued. This year, however, investors seemed to worry that buybacks might indicate that executives could not find more profitable ways to deploy cash, such as building new plants. "The most direct inference that can be drawn is that companies are still somewhat cautious about how to redeploy their capital," said Steven P. Clark, a finance professor at the University of North Carolina at Charlotte.

Analysts said foreign-profit repatriation could be another factor driving buybacks. Under a one-year tax holiday, companies brought home $200 billion or more in foreign profit in 2005. The tax break forbids companies from using the money to buy back stock. But because they did not have to specify what they used the money for, analysts suggested that some of the repatriated profit went to buybacks.

Pressure from activist investors to return money to shareholders also has driven buybacks. Time Warner Inc. announced last month that it would more than double its buyback program, to $12.5 billion from $5 billion, under pressure from corporate financier Carl C. Icahn.

Biderman, of the TrimTabs research firm, said the market impact of recent buybacks, coupled with increased dividends paid by cash-rich companies, will be felt next year as investors grow more confident about the economy and the ability of corporations to keep increasing profits. "Absent some kind of shock to the system, the market should soar next year," Biderman said. "There is just a ton of cash out there." Other experts said a continued slowdown in returns from real estate investments also could send more money into the equity market, as could a halt to the Federal Reserve's campaign of raising interest rates.

If such a market boom does arrive in 2006, which stocks would benefit?

In 2005, the energy sector once again dominated, driven by soaring oil and gas prices. Health care, biotechnology, utilities, financial stocks and basic materials also fared well. Shares of smaller companies, which raced ahead in the beginning of the current economic cycle, finally slowed in 2005 and mid-size firms thrived. Analysts expect that trend to continue in 2006 as economic growth slows. Some also expect big companies, such as those in the S&P 500, to do well because their shares now trade at modest valuations.

Potential pitfalls in 2006 would include a collapse of the housing market, a major terrorist attack or more devastating hurricanes. In addition, 2006 is a congressional election year, which could bring political upheaval to Washington.

Typically, when an incumbent president is in his second term, as President Bush is now, the opposition party picks up seats in Congress. In 1986, for example, Democrats regained control of the Senate in the middle of Ronald Reagan's second presidential term. Despite the turmoil, stocks posted double-digit gains. Experts said the market could be choppy heading in to the 2006 elections but might once again emerge with strong gains after the uncertainty is resolved, regardless of the outcome.

Movers

Hilton Hotels rose $1.70, to $24. The company said it would acquire the British Hilton Group for $5.6 billion to create the world's largest hotel company.

Wal-Mart Stores fell 36 cents, to $47.48. It said sales of gift cards were better than expected during the holidays but did not provide figures.

General Motors rose 40 cents, to $19.01, even though Credit Suisse First Boston predicted double-digit sales declines.