Stock rally stalls

Previously under-the-radar softness in US stocks was a little more out in the open last week, as most of the major indexes lost ground despite the tech sector’s best efforts to hold up the market.

Not that it was a major setback. The S&P 500 (SPX) may not have pushed to new highs, but it also didn’t trade more than a few points below the previous week’s low as traders digested mixed inflation data and a jump in weekly jobless claims:

The headline: Stocks slip ahead of Fed meeting.

The fine print: Last week’s headline Consumer Price Index (CPI) and Producer Price Index (PPI) readings may have been a little “stickier” than expected, but they didn’t reveal a meaningful, across-the-board inflation surge. For example, the PPI’s increase was largely the result of a big (more than 50%) jump in egg prices.

The number: 97%, the odds (as of Friday) that the Fed would deliver a 0.25% rate cut on Wednesday. But the odds the Fed wouldn’t cut rates in January stood at 81%.¹

The move: Alphabet (GOOGL) jumped 11.4% last Tuesday-Wednesday after announcing the launch of its quantum-computing chip—one of the reasons the Nasdaq 100 (NDX) tech index and the Nasdaq Composite (COMP) closed at record highs on Wednesday. Fellow megacaps Amazon (AMZN), Meta (META), and Tesla (TSLA) also hit record highs last Wednesday.

The scorecard: The Nasdaq 100 (NDX) tech index was the only major index to post a gain last week:

Sector returns: The strongest S&P 500 sectors last week were communication services (+2.5%), consumer discretionary (+1.4%), tech (-0.2%). The weakest sectors were materials (-2.9%), utilities (-2.7%), and real estate (-2.4%).

Stock movers: UniQure (QURE) +110% to $15.30 and NewAmsterdam Pharma (NAMS) +41% to $26.19, both on Tuesday. Keros Therapeutics (KROS) -73% to $18.43 and Lovesac (LOVE) -32% to $25.74, both on Thursday.

Futures: January WTI crude oil (CLF5) wrapped up its ninth-straight “reversal week,” closing Friday at $71.29, up $4.09 for the week. February gold (GCG5) closed at five-week high of $2,756.70 last Wednesday, then pulled back sharply to end the week modestly higher at $2,675.80. Week’s biggest gains: March cocoa (CCH5) +14.7%, January natural gas (NGF5) +6.7%. Week’s biggest declines: January lumber (LBSF5) -5%, March sugar (SBH5) -5%.

It’s a busy week, with some numbers that usually come out later in the month bumped up because of the holidays. In addition to the Fed’s final interest rate decision, traders will see retail sales, the Fed’s preferred inflation barometer (the PCE Price Index), and the final Q3 GDP estimate:

●Monday: Empire State Manufacturing Index, S&P Global U.S. manufacturing and services PMIs (flash)
●Tuesday: retail sales, industrial production and capacity utilization, NAHB Housing Market Index
●Wednesday: Housing Starts and Building Permits, current account Q3, Fed interest rate decision
●Thursday: Q3 GDP (final), Philadelphia Fed Manufacturing Survey, existing home sales, Leading Economic Indicators Index
●Friday: Personal Income and Spending, PCE Price Index, consumer sentiment

This week’s earnings include:

●Monday: RCI Hospitality (RICK)
●Tuesday: Amentum (AMTM), Heico (HEI), Worthington Enterprises (WOR)
●Wednesday: Birkenstock (BIRK), General Mills (GIS), Jabil (JBL), Lennar (LEN), Micron (MU)
●Thursday: Accenture (ACN), Conagra (CAG), Cintas (CTAS), Darden Restaurants (DRI), CarMax (KMX), Paychex (PAYX), FedEx (FDX), Nike (NKE)
●Friday: Winnebago (WGO)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

On a long-term basis, December has been one of the most consistently bullish months of the year for stocks, positive 73% of the time since 1957.

But as Morgan Stanley & Co. analysts recently noted, the majority of December’s gains have historically been concentrated in the latter half of the month²—a tendency that more or less align with the so-called “Santa Claus Rally” many investors look for around the holidays. The following chart shows the SPX’s median December intramonth return from 1957-2023 (green line),³ along with its performance so far this December (blue line):

This chart shows the final six to eight trading days of December (from day 15 forward) have, overall, accounted for a good chunk of the month’s historical gains.

Splitting the month in half, the SPX’s median net return for the first 11 trading days of December was 0.67%, while the median net return for the next 11 trading days was 1.25%. The first half of the month was positive in 41 years since 1957 (61% of the time), while the second half was positive in 52 years (78% of the time). However, in three recent years (2016, 2018, and 2022), the SPX fell 1% or more in the second half of December.

As of Friday, the SPX was up 0.3% for the month, lagging its 0.5% historical median return through day 10.

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¹ CMEGroup.com. FedWatch Tool. 12/13/24.
² MorganStanley.com. How Equity Markets Are Feeling About 2025. 12/10/24.
³ All figures reflect S&P 500 (SPX) daily closing prices, 1957–2023. December “intramonth” return refers to the cumulative percentage change in the SPX, measured from the final trading day of November to each of the next 22 trading days. (Depending on the year, the 22nd trading day of December may represent the first trading day of January rather than the final trading day of December.) Supporting document available upon request.