Stock Market Continues Santa Claus Rally, Key Averages Hit New 52-Week Highs

Strategic Insights -

The stock market maintained its Santa Claus rally, with key averages reaching new 52-week highs on Wednesday. Portfolio managers preferred to leave well enough alone, allowing the rally to continue, while the commodities market saw a bit more volatility. Light sweet oil futures dropped 2.2% on Wednesday, while gold futures rose 0.9% to $2,088.90 per ounce. The Dow Jones Industrial Average rose 0.3%, led by Goldman Sachs, which gained 2.87 points or nearly 0.8%.

Key Takeaways:

  • The stock market maintained its Santa Claus rally, with key averages reaching new 52-week highs on Wednesday.
  • Portfolio managers chose to opt out of disturbing the rally, allowing it to continue.
  • Commodities saw a bit more volatility, with light sweet oil futures dropping 2.2% on Wednesday.
  • Gold futures rose 0.9% to $2,088.90 per ounce.
  • The Dow Jones Industrial Average rose 0.3%, led by Goldman Sachs, which gained 2.87 points or nearly 0.8%.
  • The yield curve in the Treasury market remains unfavorably inverted, but yields on shorter-term bond instruments have come down sharply.
  • The CME FedWatch survey shows a high chance that the Federal Reserve will preemptively act to trim short-term interest rates, with a probability of at least a quarter-point cut rising to 90.3%.
  • Forecasts are always data-dependent and can swing dramatically, but recent economic data has given investors confidence that the Fed is winning the battle for stable prices without harming the economy.
  • Some bullish stock market observers have dubbed it the "immaculate disinflation."
  • Weekly jobless claims are set to be released on Thursday, and the stock market will greet fresh news on the job market and consumer prices in January.

Statistics:

  • The S&P 500 has gained 24.5% year-to-date.
  • The Nasdaq 100 has gained 54.5% since Jan. 1.
  • The Dow has shown an average gain of 8.8% in election years when a sitting president runs for reelection since 1900.
  • The Dow has shown an average gain of 9.9% in election years when a sitting president runs for reelection since 1950.
  • The S&P 500 has shown a 1.9% average yearly loss in election years when an election does not feature a sitting president since 1949.

Sources:

  • Dow Jones
  • Comex exchange
  • CME FedWatch survey
  • U.S. Treasury data
  • The Stock Trader's Almanac for 2024
  • Jeffrey Hirsch and Christopher Mistal
  • The Richmond Fed Manufacturing Index
  • The Trader's Almanac View