Even with Friday’s rise, stocks have been having a hard time before the holidays.
If you talk to Mark Hackett, chief market analyst at Nationwide, on the phone, he said that the U.S. stock market had a “breakdown in breadth” at the beginning of December. This came after a strong rally in November.
He told them, “I don’t think the traditional ‘Santa Claus rally’ is going to happen because I think you might have already skipped that in November.”
After losing 4.6% from December to Friday, the Dow Jones Industrial Average DJIA -0.05% has lost most of its gains this quarter. Dow Jones Market Data shows that the Nasdaq Composite COMP +1.95 % ended the week with its first weekly loss and the S&P 500 SPX +0.57% ended the week with its second weekly loss.
This past week, the stock market fell after the Federal Reserve said that interest rates might go down less in 2025 than they had previously thought. This slowed down the stock market’s big rise after the U.S. election. Investors are now worried about recent bad breadth in the top-heavy S&P 500 index and don’t know what President-elect Donald Trump will do in 2025.
The S&P 500 is falling before a period of trading that has generally been good for stocks. However, investors who were hoping for a “Santa Claus rally” didn’t get one either last year.
This year, the usual time to buy things from Santa Claus will start on Christmas Eve and end on January 3. During this time of year, buyers are looking for a “Santa rally.” The seven sessions include the last five trading days of December and the first two trading days of January.
Dow Jones Market Data shows that since 1950, the S&P 500 has gained an average of 1.29% during this December trading stretch, finishing the year higher 77% of the time. But the Santa rise didn’t happen last year. Instead, the S&P 500 fell 0.9% over the next seven days, leading up to 2024.
The U.S. stock market will be closed on December 25 (Christmas Day) and January 1.
Economists at First Trust said in a note released Friday that consumers seem to be enjoying the “happy holiday season.” The note was based on the most recent data on personal income and spending in November. It was another month of strong income growth and healthy spending, but overall inflation slowed down.
The personal-consumption-expenses price index showed that U.S. inflation rose a little less than Wall Street thought it would in November.
The U.S. stock market went up on Friday after inflation data that was lower than expected gave buyers peace of mind about how stable prices would be going into 2025. But at the end of the week, all three big stock market benchmarks had lost money and couldn’t get out of Wednesday’s slump.
The Dow DJIA -0.05% rose 1.2% on Friday, its biggest gain since the day after the U.S. election in early November. The S&P 500 also rose 1.1%, and the Nasdaq Composite COMP +1.95 % ended the day up 1%.
But over the course of the week, the Dow fell 2.3%, the S&P 500 fell 2%, and the tech-heavy Nasdaq dropped 1.8%. Big Tech stocks make up a big part of the S&P 500 and have led the index’s rise so far in 2024. However, after falling on Wednesday, they had a mixed week.
The Roundhill Magnificent Seven ETF MAGS +1.59%, which gives equal weight to seven closely watched Big Tech stocks, lost more than 1% for the week ending Friday. These stocks are Apple Inc. AAPL -0.06%, Microsoft Corp. MSFT -0.15%, Alphabet Inc. GOOGL +1.65%, Amazon.com Inc. AMZN +0.57%, Nvidia Corp. NVDA +3.41%, Tesla Inc. TSLA +2.96%, and Facebook parent Meta Platforms Inc. The ETF stopped making gains after four weeks in a row, which had added to its huge rise in 2024.
Bloomberg analysts wrote in a Friday report that the “bump” in stocks caused by the U.S. election has “round-tripped” as investors have switched their attention from “deregulation and potential tax-cut tailwinds” to “worries about the Fed’s policy trajectory,” “sticky inflation,” and “a possible partial government shutdown.”
On Friday, there was a chance that some parts of the U.S. government would shut down. But early Saturday morning, the House and Senate rushed through final passage of a bipartisan plan that would briefly fund federal operations. This meant that Trump’s demands for raising the government debt limit would not be met until the new year.
Aside from government spending, investors will also be looking forward to hearing more about the new trade and immigration policies that the next White House administration plans to implement in 2025. There is concern among investors that stricter tariffs and large-scale deportations could cause prices to rise and slow down economic growth.
Even though 2024 was a good year overall, both the Dow and the S&P 500 were still down in December on Friday.
He said, “The average stock in the S&P 500 has been really weak for the whole month.”
According to FactSet, the S&P 500 is down 1.7% so far in December, bringing its gain for the fourth quarter to 2.9%. Up just 1.2% so far this quarter, the Dow was holding on to its lead as of Friday.
Nasdaq, on the other hand, has done better. Its 1.8% rise this month brings its fourth-quarter jump to 7.6%.
He said on the phone, “I don’t think we’ll see a huge rally from now until the end of the year.” Anthony Saglimbene is the chief market strategist at Ameriprise Financial.
The Nasdaq has gone up 30.4% so far this year, the S&P 500 has gone up 24.3%, and the Dow has gone up 13.7%. Dow Jones Market Data says that the S&P 500 closed 2.6% below its all-time high of 6,090.27, which it hit on December 6.
Saglimbene said, “There’s a lot of hope already priced into stocks.” “The market has done really well this year.”
