Santa has to take care of everything.
Tuesday’s holiday-shortened trading session was the start of the “Santa Claus rally.” The S&P 500 SPX +1.10% went up 1.1%, erasing a December drop as it scored its third straight gain and undoing the damage from last week’s midweek crash. The large-cap average has had a great year in 2024, but December hasn’t helped much. December is still in danger of not being one of the best months for stocks like it always is.
There has been some improvement in the S&P over the last two sessions, but the rally has not been very strong, according to a note from Jeff deGraaf, chairman and head of technical research at Renaissance Macro Research, before Tuesday’s starting bell.
He said that December has a 74% chance of positive returns in the past, but “2024 is shaping up to be the 26% outlier unless it gets some serious help.” (Look at the picture below.)
That’s where the happy old elf might come in. The Santa Claus rally time started at the start of the market on Tuesday and will end on January 3. The Santa rally is a seasonal trend for the S&P 500 to rise during the last five trading days of a calendar year and the first two trading days of a new year. It was first mentioned by Yale Hirsch, the founder of Stock Trader’s Almanac, in 1972.
According to the Almanac and Dow Jones Market Data, the S&P 500 has made a solid 1.3% gain over the last seven trading days since 1969. The S&P 500 has gained an average of 0.24% over a seven-day trading session.
What’s the reason for the phenomenon? Mark Hulbert, a columnist for MarketWatch, says that one reason could be that buyers don’t want to think about the markets over the holidays. Because of this, the trend may have been able to last, even though investors tend to ignore seasonal events once they become public.
Tuesday was a good start to the rising period. The S&P 500 turned its December drop into a 0.2% month-to-date gain. The Dow Jones Industrial Average DJIA +0.91% went up almost 400 points, or 0.9%, after going down 4% in December. On Tuesday, the Nasdaq Composite COMP +1.35% went up 1.3%. It was up 4.2% in December, thanks to a comeback in tech stocks.
The U.S. stock market closed early on Tuesday, and it will be closed on Wednesday for the Christmas Day holiday. It will resume early on Thursday.
Hirsch told many people, “If Santa Claus should fail to call, bears may come to Broad and Wall.” This means that investors will also pay attention.
Jeff Hirsch, author of the Stock Trader’s Almanac, said that times when there hasn’t been a Santa rally tend to be before bear markets or times when stocks could be bought later at lower prices. Almanac standards say that years without Santa rallies were followed by flat years in 1994, 2005, and 2015. There were also bad bear markets in 2000 and 2008, and a mild bear market that finished in February 2016.
Of course, not every market saying is true. Even though Santa didn’t come last Christmas, the S&P 500 is still on track for a gain of about 26% in 2024. Its biggest drop this year was only 8.5% from July 16 to August 5.
