A rally in the group that has led Wall Street’s gains in 2024 lifted stocks in a relatively quiet session ahead of Christmas.
Following an intense day for big tech, the shares continued to power ahead on Tuesday. Tesla Inc. led megacaps higher. Broadcom Inc. and Advanced Micro Devices Inc. climbed as President Joe Biden’s team launched a probe into Chinese-made chips. In a shorter pre-holiday session, the S&P 500
“The past few weeks’ action shows that the big-cap tech names are still the key leadership group in today’s stock market,” said Matt Maley at Miller Tabak. “These big-tech names are highly overweighted in the portfolios of many institutional investors. Any buying they do over the next week will likely be concentrated in these names.”
Equity investors are also hoping for what’s known as the “Santa Claus Rally,” in which stocks rise during the final five trading sessions of a year and the first two of the new one. This time around that window started Tuesday.
“The Santa Claus rally could still be alive, with strong seasonality into the end of the year,” said London Stockton at Ned Davis Research.
Since 1950, the S&P 500 has generated average and median returns of 1.3%, widely outpacing the market’s average seven-day gain of 0.3%, according to Adam Turnquist at LPL Financial.
“When investors are on the ‘nice’ list and Santa delivers a ‘positive’ Santa Claus Rally return, the S&P 500 has generated an average January and forward annual return of 1.4% and 10.4%, respectively,” he said.
The S&P 500 rose 1.1%. The Nasdaq 100 added 1.4%. The Dow Jones Industrial Average gained 0.9%.
The yield on 10-year Treasury bonds changed slightly, at 4.59%. The Bloomberg Dollar Spot Index barely budged.
While a positive “Santa Claus Rally” has preceded the S&P 500’s 10.4% average annual gain since World War II, Sam Stovall at CFRA says the “January Barometer” is a more accurate indicator.
That’s a market hypothesis positing that January’s performance predicts the year’s performance. Yale Hirsch, creator of the Stock Trader’s Almanac, coined the term in 1972.
Since 1945, when the year started with a gain in January, the S&P 500 rose an average of 18.3% in price during the entire year, Stovall at CFRA said. However, if the first month saw a price decline, the average full-year return was negative at 1.9%.
Bespoke Investment Group strategists noted that with the market up over 25% this year and no corrections of more than 10%, the S&P 500 has managed to stay solidly above its 200-day moving average for 2024.
“Barring a significant market selloff in the last few trading days of the year, this will be the 12th year since 1952 (when we went to the current 5-day trading week at the NYSE) that the S&P has traded above its 200-DMA all year” they said.
Bespoke noted that the average next-year change following these years has been a gain of just 4.6% compared to the average gain of 9.2% for all years.
Last week, Bank of America Corp. clients were large net buyers of US equities, according to strategist Jill Carey Hall. They bought American shares for the seventh consecutive week.
Similar to the prior five weeks, clients bought both single stocks and exchange-traded funds, with bigger inflows into the former, she noted. Flows were primarily in large caps.
According to Citigroup Inc. strategists led by Scott Chronert, investors should take a more balanced approach to US stocks over the first quarter. They see a greater opportunity in defensive sectors.
They raised health care to overweight, noting that valuations are now lower and fundamentals seem close to an inflection point. Meanwhile, they are selective on growth stocks, looking for a stronger fundamental trend than valuation and potential margin improvement.
Citi’s strategists are overweight in media, internet, and semiconductors while raising software to market weight.
Corporate highlights:
- American Airlines Group Inc said a technical vendor glitch was the cause of a brief groundstop on all US flights on Christmas Eve, one of the busiest days of the holiday travel season.
- Nippon Steel Corp’s proposed $12.3 billion acquisition of US Steel Corp. moved a step closer to being blocked after a US national security panel deadlocked on its review and left the final decision with President Biden, who has repeatedly indicated his opposition to the deal.
- Salesforce Inc says it’s taking multiple large customers from former partner Veeva Systems Inc. in a mounting rivalry to sell software to the pharmaceutical industry.
- According to the coffee chain, a Starbucks Corp barista strike has shut down about 170 cafes, disrupting service at locations nationwide during the final days of the crucial holiday shopping season.
- Arcadium Lithium Plc, a chemicals company, said it obtained all shareholder approvals for a proposed acquisition by Rio Tinto Plc.
Stocks
- The S&P 500 rose 1.1%
- The Nasdaq 100 rose 1.4%
- The Dow Jones Industrial Average rose 0.9%
- The MSCI World Index rose 0.9%
- Bloomberg Magnificent 7 Total Return Index rose 2.1%
- The Russell 2000 Index rose 1%
