Weekly Market Insights - December 30, 2024

Stocks notched a slight gain over the holiday week. A tech-driven rally in the first half of the week was clawed back in the second half as investors took profits following the market holiday.

The Standard & Poor’s 500 Index advanced 0.67 percent, while the Nasdaq Composite Index rose 0.76 percent. The Dow Jones Industrial Average added 0.35 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 1.54 percent.^1,2

Ho-Ho, Then No-Go

Stocks rallied during the first half of a shortened holiday trading week. Holiday cheer won out despite news of declining consumer confidence in December, a drop in durable goods, and new home sales reporting below expectations.^3,4

The “Santa rally” lost its ho-ho-go after the midweek holiday. Megacap technology stocks led markets down on Friday, giving back most of the gains from the first half of the week.^4,5

A Long December

Despite the slight weekly gain, markets have felt "off" in December compared to the preceding eleven months of 2024. Here's a quick look under the hood on what's been happening in December:

Fixed Income:

Despite the Fed completing one full percentage point of cuts to the Fed Funds rate in the back half of 2024, the US 10-year yield closed Friday near its high for 2024 at 4.62%. One month ago, the 10-year yield was 4.25% and one year ago it was 3.79%. What to make of this--this seems like the bond market repricing (rightly or wrongly) to remove the recession risk that has hung over markets for the last 18-24 months. The Fed hasn't lost control of the bond market and we still believe that high quality, intermediate term government and municipal bonds look attractive as hedges to equity market volatility while offering solid yields at 4.5%+.

Stocks:

The activity in global stock markets has been interesting in December to say the least. The first half of the month saw incessant selling in underperforming sectors of the global stock markets--namely US energy, healthcare and materials stocks alongside international developed and emerging markets stocks--all while large cap US growth companies and indices continued to make new highs. This market activity reeked of tax loss selling and is normal during this time of year.

The second half of December is generally characterized by low volumes across all global markets--stocks, bonds, currencies, etc. With traders and investors away from their desks for the holidays, market moves can be exacerbated by large institutional investors required to rebalance their exposures at the end of a quarter or calendar year. This is exactly what's happened over the last couple of trading days as many institutional firms have been rebalancing their exposures. As such the best performing names for the year (think NVDA, AVGO, TSLA, et al) have been under pressure and dragging down the major US indices.

The Real Santa

While Santa got the headlines, the consumer drove the holiday shopping sleigh this year.

Holiday spending—defined by the period from November 1 through December 24—rose 3.8 percent in 2024, compared with 3.1 percent in 2023. Economists closely follow consumer activity since consumer spending makes up roughly two-thirds of total gross domestic product. Market watchers attributed the strong job market and growth in household wealth as the primary drivers of consumer strength.⁶

This Week: Key Economic Data

Monday: Pending Home Sales. 3-Month Treasury Bill Auction.

Tuesday: Case-Shiller Home Price Index.

Wednesday: Stock market closed.

Thursday: Jobless Claims. EIA Petroleum Status Report. Fed Balance Sheet. 30-Year Treasury Bond Announcement.

Friday: Motor Vehicle Sales. ISM Manufacturing Index. Federal Reserve Officials Thomas Barkin and Mary Daly speak.

^{Source: Investors Business Daily - Econoday economic calendar; December 27, 2024
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Friday: The Greenbrier Companies, Inc. (GBX)

^{Source: Zacks, December 27, 2024. Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

“The strongest of all warriors are these two — Time and Patience.”

– Leo Tolstoy

Delicate Arch 

Arches National Park, Utah, USA

Footnotes and Sources

^{1. The Wall Street Journal, December 27, 2024}

^{2. Investing.com, December 27, 2024}

^{3. MarketWatch.com, December 23, 2024}

^{4. CNBC.com, December 26, 2024}

^{5. The Wall Street Journal, December 27, 2024}

^{6. MarketWatch.com, December 26, 2024}

^{7. IRS.gov, March 18, 2024}

^{8. American Academy of Dermatology, August 1, 2024}