The US stock market exhibited a mostly positive trend on Tuesday, primarily driven by gains in the technology sector. This upward movement coincides with the commencement of the Santa Claus rally, a historically bullish seven-day period in the stock market.
This year, the Santa Claus rally begins on a shortened trading session due to Christmas Eve, with the stock market closing at 1 p.m. EST. Both the stock and bond markets will remain closed on Wednesday for Christmas Day. The bond market will also close early on Tuesday, at 2 p.m. EST. This period, encompassing the last five trading days of the year and the first two of the new year, has historically shown strong performance for stocks.
The Santa Claus rally is a phenomenon observed in the stock market, characterized by a tendency for stock prices to rise during this specific timeframe. Historical data indicates a compelling trend: since 1950, the S&P 500 has averaged a 1.3% return during the Santa Claus rally period, with positive returns occurring 79% of the time. Expanding the dataset back to 1928 reveals an even stronger average gain of 1.6%, as per Bank of America data.
While investors had no new economic data to assess on Tuesday, they will be keenly awaiting the release of initial jobless claims data on Thursday morning. Economists anticipate a slight increase to 225,000 claims, compared to the previous week’s figure of 220,000.
Market Performance at Open:
Shortly after the opening bell at 9:30 a.m. EST on Tuesday, the major US indexes displayed the following performance:
- S&P 500: 5,982.87, up 0.14%
- Dow Jones Industrial Average: 42,892.81, down 0.03% (-10 points)
- Nasdaq Composite: 19,838.09, up 0.40%
Other Notable Developments:
Beyond the market’s performance, several other noteworthy events unfolded:
American Airlines Grounding: A technical malfunction led to a temporary grounding of all American Airlines flights on Tuesday, causing disruptions during the busy Christmas travel period.
Recession Probability: A prominent economist has asserted a 0% probability of a US recession in 2025, offering a positive outlook for the economy.
Consumer Confidence Decline: Consumer confidence dipped to near-recessionary levels leading up to the commencement of the next presidential administration, signaling potential economic concerns.
S&P 500 Target Predictions: Wall Street analysts have published their 2025 S&P 500 target predictions, providing insights into market expectations for the coming year.
In conclusion, the Santa Claus rally has commenced on a positive note, with tech stocks propelling market gains. While the holiday-shortened trading week offers limited economic data, investors are anticipating upcoming jobless claims figures. The historical performance of the Santa Claus rally period suggests a potential for continued positive momentum in the stock market.
