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Stocks Buoyed as ‘Santa Claus Rally’ Period Begins: Markets Wrap

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Stocks Buoyed as ‘Santa Claus Rally’ Period Begins: Markets Wrap

(Bloomberg) — A rally in the group that has led Wall Street’s gains in 2024 lifted stocks in a relatively quiet session ahead of Christmas.

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Following a strong 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 shortened pre-holiday session, the S&P 500 closed with an advance of over 1% amid thin trading volume.

“The action of the past few weeks 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 a huge number of institutional investors. Any buying they do over the next week is likely to 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.

“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% during this period, 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 Treasuries was little changed at 4.59%. The Bloomberg Dollar Spot Index barely budged.

While a positive “Santa Claus Rally” has preceded a 10.4% average annual gain for the S&P 500 since World War II, Sam Stovall at CFRA says a more accurate indicator in his view is the “January Barometer.”

That’s a market hypothesis positing that January’s performance predicts the year’s performance. The term was coined by Yale Hirsch, creator of the Stock Trader’s Almanac, 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. If the first month saw a decline in price, however, the average full-year return was negative 1.9%.

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