Stocks Kick Off Holiday-Shortened Week With Gains: Markets Wrap

(Bloomberg) — A rally in some of the world’s largest technology companies spurred a rebound in stocks, following a brief slide fueled by weaker-than-expected data on US consumer confidence.

While most companies in the S&P 500 retreated, Tesla Inc. and Nvidia Corp. drove a gauge of the “Magnificent Seven” megacaps up over 1%. It was still a thin trading session at the start of a holiday-shortened week, with volume roughly 20% below the average of the past month.

“Primary uptrends remain intact for equities despite the recent profit-taking,” said Craig Johnson at Piper Sandler. “Given the short-term oversold conditions, we expect a ‘Santa Claus Rally’ to be a strong possibility this year.”

To Morgan Stanley’s Michael Wilson, negative breadth — when falling shares outnumber those that are rising — may not matter as much for high-quality stock indexes with robust price momentum.

Earlier Monday, stocks lost steam momentarily after data showed consumer confidence unexpectedly sank for the first time in three months on concerns about the outlook for the economy.

“The economic outlook is deteriorating,” said Neil Dutta at Renaissance Macro Research. “This was true before the Fed’s December confab and remains true. The risk of the Fed flip-flopping is quite high.”

The S&P 500 added 0.4%. The Nasdaq 100 climbed 0.7%. The Dow Jones Industrial Average wavered. Qualcomm Inc. climbed after prevailing at trial against Arm Holdings Plc’s claim that it breached a license for chip technology. Rumble Inc. soared the most on record as Tether will buy a stake in the video-sharing platform. The Nordstrom family is joining forces with a Mexican retailer to take its namesake department store private.

Treasury 10-year yields advanced seven basis points to 4.59%. The Bloomberg Dollar Spot Index rose 0.3%.

The S&P 500 is on its way to record a stellar annual return and back-to-back years of more than 20% gains. The index has risen about 25% since the end of 2023, with the top seven biggest technology stocks accounting for more than half of the advance.

“Last week’s action should mark the end of the recent pullback and allow a ‘Santa Claus Rally’,” said Jonathan Krinsky at BTIG. “We do think a deeper correction early in ’25 is likely, albeit from a new all-time high.”

Whether or not the gauge will be able to stage a “Santa Claus Rally,” that continues to be a barometer of investors’ optimism into the new year. That seven-day period includes the last five trading days of the old year and the first two of the new one.

A positive “Santa Claus Rally” has preceded a 10.4% average annual gain for the S&P 500 since World War II, as well as a 74% frequency of advance, according to Sam Stovall at CFRA. However, a decline in this seven-day period saw the gauge post an average annual increase of only 5.7%, posting a gain just 32% of the time.

Yet Stovall says a more accurate indicator in his view is the “January Barometer.”

Since 1945, if the year started with a gain in January, the S&P 500 rose an average of 18.3% in price during the entire year, advancing an average of 91% of the time, Stovall said. If the first month declined in price, however, the average full-year return was negative 1.9%.

Corporate Highlights:

• MetLife Inc. agreed to buy PineBridge Investments’ assets outside of China from Hong Kong billionaire Richard Li’s Pacific Century Group as part of the US insurer’s push to grow in asset management.
• Xerox has agreed to buy printer maker Lexmark International Inc. from a consortium of Asian investors in a deal valued at $1.5 billion.
• Hyatt Hotels Corp. is in exclusive talks with Playa Hotels & Resorts NV over strategic options that may include an acquisition of the all-inclusive resort owner.
• Aviva Plc agreed to buy Direct Line Insurance Group Plc for roughly £3.7 billion ($4.65 billion) in a deal that would create the UK’s largest motor insurer.
• Prosus NV is acquiring online travel agency Despegar.com Corp. for $1.7 billion as the Dutch technology investor seeks to expand its online commerce presence in Latin America.
• Honda Motor Co. sketched plans for a drawn-out deal that amounts to a takeover of Nissan Motor Co. in all but name, as Japan’s automakers struggle to keep up in an increasingly competitive global car industry.

Key events this week:

• Christmas Day, Wednesday
• US initial jobless claims, Thursday
• Boxing Day, Thursday
• Japan Tokyo CPI, unemployment, industrial production, retail sales, Friday
• US goods trade, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.4% as of 3:06 p.m. New York time
• The Nasdaq 100 rose 0.7%
• The Dow Jones Industrial Average was little changed
• The MSCI World Index rose 0.4%
• Bloomberg Magnificent 7 Total Return Index rose 1.1%
• The Russell 2000 Index fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.2% to $1.0410
• The British pound fell 0.3% to $1.2535
• The Japanese yen fell 0.5% to 157.08 per dollar

Cryptocurrencies

• Bitcoin fell 2.5% to $92,731.67
• Ether rose 1.5% to $3,328.91

Bonds

• The yield on 10-year Treasuries advanced seven basis points to 4.59%
• Germany’s 10-year yield advanced four basis points to 2.32%
• Britain’s 10-year yield advanced four basis points to 4.55%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold fell 0.4% to $2,612.58 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Robert Brand, Winnie Hsu and Matthew Burgess.

©2024 Bloomberg L.P.