Santa Claus rally boosts S&P 500

The stock market saw significant gains on Christmas Eve, driven primarily by strong performances in tech stocks.

The S&P 500 gained more than 1% on the first day of the Santa Claus Rally (SCR).

Now what?

Full SCR period has never been lower, up 7 out of 7.

Final 6 days? Higher 5 of 7, with two small losses and up 1.7% on avg.

🎅💪 pic.twitter.com/dwCKraVxAA

— Ryan Detrick, CMT (@RyanDetrick) December 26, 2024

The S&P 500 rose 1.1% to 6,040.04, while the Dow Jones Industrial Average climbed 390.08 points, or 0.91%, to 43,297.03. The tech-heavy Nasdaq Composite increased by 1.35% to 20,031.13, buoyed by a 7.4% jump in tech stocks.

Stock market outlook: Auto sales data, record dates – Top cues to watch in New Year’s first weekhttps://t.co/jiQK3yvrZl

— ET NOW (@ETNOWlive) December 29, 2024

The New York Stock Exchange closed early at 1 p.m. ET for Christmas Eve, and the bond market closed at 2 p.m. Both markets will remain shut on Wednesday for Christmas Day. This trading session marked the beginning of the seasonal Santa Claus rally, which traditionally occurs during the last five trading days of the year and the first two trading days of January. Historical data from LPL Research notes the S&P 500 has averaged a 1.3% return during this period since 1950, significantly higher than the average seven-day return of 0.3%.

Market Outlook: Bull run in new year 2025’s first week? Experts see buying opportunities in THESE stockshttps://t.co/GAO3tuDNJk

— ET NOW (@ETNOWlive) December 29, 2024

Paul Hickey, co-founder of Bespoke Investment Group, expressed cautious optimism on “Squawk Box”: “There’s a lot of good to think about, but at the same time, you want to be restrained in your enthusiasm here because the market has rallied.”

Looking at the most traded stocks on US exchanges today w/a market capitalization >$500mln, one might get the impression that the stock market resembles a casino. pic.twitter.com/WeGsPKfDoX

— Holger Zschaepitz (@Schuldensuehner) December 26, 2024

With two consecutive winning days, the S&P 500 is up 1.8% this week, the Dow has gained about 1%, and the Nasdaq has rallied 2.3%. The S&P 500 turned green for December with a modest 0.1% gain, while the Nasdaq has surged 4.2% this month. The Dow, however, remains down about 3.6% for December, poised for its worst monthly performance since April. Shares of American Airlines fluctuated after a brief grounding of all flights due to a technical issue, one of the busiest travel days of the year. Despite the disruption, the stock ended the session 0.6% higher. Jefferies analysts reported a positive outlook for toy sales this holiday season, observing well-trafficked aisles and lower inventory levels compared to the beginning of the season. They noted particular strength in board games and a reduction in discounts from Black Friday peaks. Notably, Walmart and Target have allocated more space to toys since Cyber Monday.

Santa Claus rally impacts major indexes

However, toy stocks have had a mixed performance this year. Mattel shares are up over 11% year to date, while Hasbro is down more than 5%, with a sharper decline of nearly 13% this month alone. During midday trading, several stocks showed significant movements. American Airlines shares recovered from earlier losses, ending the day with a slight dip of less than 1% after the technical issue. Semiconductor stocks continued their December rally, with one prominent chip stock gaining 2%, culminating in a 46% surge this month and a more than 112% increase for the year. Big banks also saw gains, with some stocks rising over 1% amid discussions about the annual stress tests. Concerns were raised about inconsistent requirements and restrictions on bank capital. Shares of Palantir Technologies reached an all-time high with a 4% gain on Tuesday, marking a new intraday record. The stock has surged over 390% this year, far exceeding analysts’ expectations. Looking ahead to 2025, Trivariate Research highlighted First Solar as a notably undervalued stock, with its forward price-to-earnings ratio dropping below 10 times earnings for the first time in five years. Despite a challenging year, there is optimism about its potential under the incoming administration. Treasury yields continued their upward trajectory, with the 10-year yield climbing another 3 basis points to 4.613%, its highest level since May 30. The 30-year yield also rose to 4.808%, the highest since April 26. This follows a significant rise last week, influenced by the Federal Reserve’s updated rate-cut outlook for 2025. This mix of positive stock performances and fluctuations in specific sectors highlights the dynamism of the market as it approaches the end of the year.