Mixed Signals in the Stock Market as Christmas Approaches

As the Christmas holiday approaches, the stock market is displaying mixed signals, with major indices showing slight gains amid concerns over economic data. The S&P 500, Dow Jones, and Nasdaq all started the holiday-shortened trading week positively, but investors remain cautious about a potential Santa Claus rally.

Key Takeaways

• Major indices opened the week with modest gains, but futures indicate a mixed outlook.
• Economic data shows a decline in consumer confidence and durable goods orders.
• The anticipated Santa Claus rally may start late this year, according to analysts.

Market Overview

On Monday, December 23, 2024, the stock market kicked off the last trading week before Christmas with a generally positive tone. The S&P 500 rose approximately 0.7%, while the Nasdaq Composite gained about 1%. The Dow Jones Industrial Average also saw a slight increase of nearly 0.2%. However, futures for the S&P 500 and Dow were near the flatline, indicating a cautious sentiment among investors.

Despite the positive performance, trading activity is expected to be subdued this week due to the upcoming holidays. The New York Stock Exchange will close early on Christmas Eve and remain closed on Christmas Day.

Economic Concerns

While the stock market showed some resilience, it was not without its challenges. Recent economic data revealed a drop in consumer confidence, with the Conference Board’s index falling to 104.7 in December, significantly below expectations. Additionally, orders for durable goods decreased by 1.1% in November, marking the largest decline since June.

These indicators have raised concerns about the strength of consumer spending and overall economic health, which could impact market performance in the coming weeks.

Santa Claus Rally Outlook

Investors are hopeful for a traditional Santa Claus rally, which typically occurs in the last five trading days of the year and the first two of January. Historically, the S&P 500 has averaged a gain of 1.3% during this period since 1969. However, analysts from Ned Davis Research suggest that this year’s rally may start later than usual, as stocks have struggled in the days leading up to Christmas.

Jay Hatfield, CEO of Infrastructure Capital Advisors, remains cautious, maintaining a year-end target of 6,000 for the S&P 500, which implies only a modest increase from current levels. He noted that while a Santa Claus rally is possible, it may not be as robust as in previous years.

Sector Performance

Tech stocks have been among the biggest winners recently, with companies like Meta Platforms and Nvidia seeing significant gains. Notably, Nvidia’s stock rose 3.7%, while Broadcom surged over 5%. In contrast, the SPDR S&P Retail ETF has struggled, down more than 3% this month, with notable declines in companies like Signet Jewelers and Foot Locker.

Conclusion

As the stock market navigates through mixed signals ahead of Christmas, investors are left to ponder the implications of economic data and the potential for a late Santa Claus rally. With the holiday season upon us, trading activity is expected to slow, but the outlook for the new year remains cautiously optimistic, contingent on economic recovery and consumer confidence.

Sources

• Stock Chart Icon, CNBC.
• Stock market ‘Santa Claus rally’ might get a late start this year – MarketWatch, MarketWatch.
• Stock Market Today: Dow ends higher for third straight daily gain, as bulls hold out hope for Santa rally – MarketWatch, MarketWatch.