Market Recap: Wall Street Struggles as Santa Claus Rally Pauses
Major Indexes Dip Amid Holiday-Thinned Trading
On Thursday, December 26, 2024, Wall Street experienced a slight pullback as the much-anticipated Santa Claus rally hit a temporary pause. Investors and traders returned from the Christmas break to find markets struggling to maintain the momentum gained earlier in the week.
The Dow Jones Industrial Average fell 135 points, marking its first decline in five sessions. The S&P 500 dipped 0.3%, while the Nasdaq Composite also declined 0.3%. This downturn comes after a strong start to the week, with all three major indexes rising around 1% on Tuesday.
Despite the day’s losses, the market remains in positive territory for the week. The S&P 500 is up 1.6%, the Dow has gained 0.8%, and the Nasdaq has surged 2.1%, largely driven by strong performances in the technology sector.
Why Was the Market Up Earlier This Week?
The early-week gains were attributed to the onset of the “Santa Claus rally,” a phenomenon that typically occurs in the last five trading days of the year and the first two of January. Historically, this period has seen the S&P 500 generate an average return of 1.3%, significantly outpacing the market’s average seven-day return of 0.3%.
Michael Zinn, UBS Wealth Management’s senior portfolio manager, commented on CNBC’s “Squawk Box,” saying, “The Santa Claus Rally may be alive and well. We’ll see, or it could be tough sledding. It’s a sleepy time of year. The institutions aren’t really trading. It’s a little bit more retail driven.”
Key Economic Indicators and Stock Movements
The Labor Department released data showing weekly jobless claims fell to 219,000, slightly better than the expected 223,000. However, continuing claims pointed to a cooling labor market, jumping by 46,000 in the week ending December 14 to 1.91 million, the highest level since November 2021.
Several stocks made significant moves in Thursday’s session:
1. GameStop (GME): Shares jumped more than 4%, extending gains for the fourth consecutive day. The video game retailer has climbed more than 77% in 2024.
2. Crypto-related stocks: Bitcoin’s price decline affected stocks like MicroStrategy (MSTR), which fell about 3%, and Coinbase (COIN), which dropped about 2%.
3. Honda (HMC): U.S.-listed shares rose more than 4%, bringing the week’s advance to about 14%, following merger talks with Nissan.
4. Tesla (TSLA): The electric vehicle maker saw its stock rise 7.36% to $462.28.
5. NVIDIA (NVDA): The chip giant’s shares remained relatively stable, up 0.39% to $140.22.
Market Performance and Future Outlook
Month-to-date, the S&P 500 is up by a modest 0.1%, while the tech-heavy Nasdaq has rallied an impressive 4.2%, thanks to strong gains in Tesla, Apple (AAPL), and Alphabet (GOOGL). The blue-chip Dow, however, is down about 3.6%, on track for its worst month since April.
As we approach the end of 2024, investors are closely watching the Santa Claus rally’s progression. While historical data suggests a positive trend, market experts caution that end-of-year movements may not necessarily indicate how January and February will unfold.
Upcoming Market Events
With the year coming to a close, market participants are already looking ahead to potential catalysts in early 2025. Key events to watch include:
1. The release of the Federal Reserve’s minutes from its December meeting, expected in early January.
2. The December jobs report, which will provide crucial insights into the labor market’s health.
3. Fourth-quarter earnings reports, set to begin in mid-January, which will offer a comprehensive view of corporate America’s performance in the final months of 2024.
As we wrap up the year, the stock market recap for December 26, 2024, serves as a reminder of the complex interplay between economic indicators, corporate performance, and investor sentiment. While the Santa Claus rally may have hit a temporary snag, the overall positive performance this week suggests that market optimism remains intact as we head into the new year.
