The US stock market opened higher on Friday, January 3, 2025, aiming to break a five-day losing streak and secure the first daily gain of the new year. This positive movement comes amid investor concern over rising Treasury yields and potential inflationary pressures.
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Key Factors Influencing Market Performance
A significant factor impacting recent market performance is the surge in the 10-year US Treasury yield, which recently neared a one-year high of approximately 4.56%. This increase has led to higher mortgage rates and sparked concerns about a potential resurgence in inflation as Donald Trump begins his second term in the White House.
According to Katie Stockton, Fairlead Strategies, the S&P 500 is currently hovering just above a critical support level of 5,870. A drop below this level could trigger a 5% sell-off, potentially pushing the index down to its 200-day moving average of around 5,555. Friday’s pre-market trading saw the S&P 500 at approximately 5,938.
Friday also marked the end of the Santa Claus Rally trading period. Michael Reinking, senior market strategist at the New York Stock Exchange, noted that a negative return during this seven-day period could foreshadow challenges in the year ahead. A substantial rally would be needed to finish the period with positive gains. Historically, a lack of positive returns during this window has often indicated potential difficulties for the market.
Market Opening and Economic Data
Shortly after the 9:30 a.m. opening bell, major US indexes showed the following performance:
- S&P 500: 5,901.35, up 0.53%
- Dow Jones Industrial Average: 42,535.28, up 0.34% (+142.66 points)
- Nasdaq Composite: 19,461.47, up 0.94%
Investors eagerly awaited the release of December’s ISM manufacturing data, a key economic indicator. Economists predicted a reading of 48.0, slightly below November’s 48.4%. Fundstrat’s Tom Lee emphasized the importance of this data, suggesting that a move above 50 in 2025 would signal business expansion and potentially improved earnings per share (EPS) growth.
A trader works on the floor of the New York Stock Exchange.
Furthermore, insights from Federal Reserve officials were anticipated, with speeches scheduled from Richmond Fed President Tom Barkin and Fed Governor Adriana Kugler.
Other Market Developments and Commodity Performance
Several other notable developments impacted the market landscape:
- A federal tax is reportedly hindering older homeowners from selling their properties.
- The US Surgeon General issued a statement linking alcohol consumption to cancer and advocating for warning labels similar to those on cigarettes.
- President Joe Biden blocked a $14 billion takeover bid for US Steel by a Japanese company citing national security concerns.
- Wall Street analysts released their S&P 500 targets for 2025.
In the commodities market:
- West Texas Intermediate crude oil rose to $73.41 per barrel.
- Brent crude, the international benchmark, increased to $76.12 per barrel.
- Gold experienced a slight decline to $2,661.50 per ounce.
- Bitcoin saw a marginal increase to $96,991.
Conclusion: Market Volatility and Future Outlook
The US stock market’s rebound on Friday suggests a potential shift in momentum after a period of decline. However, the continued rise in Treasury yields and concerns about inflation remain significant factors influencing market volatility. Investors will closely monitor upcoming economic data and Federal Reserve pronouncements for further insights into the market’s direction. The performance of the ISM manufacturing index will be a key indicator of potential economic expansion in 2025.
