S&P 500 Faces Uncommon Again-to-Again Losses Throughout Traditionally Bullish Santa Claus Rally
For the second consecutive 12 months, the S&P 500 is about to finish the usually bullish “Santa Claus rally” interval within the crimson, leaving traders with out the same old vacation cheer. This streak marks a uncommon prevalence, as such back-to-back declines have occurred solely twice since 1950, in response to Dow Jones Market Information.
The Santa Claus rally refers back to the seven buying and selling days spanning the ultimate 5 classes of December and the primary two of the brand new 12 months. Traditionally, the S&P 500 has gained a mean of 1.3% throughout this era and completed greater practically 80% of the time. Nevertheless, in 2024, the index has dropped 1.1% for the reason that rally started, placing it on monitor for its weakest efficiency throughout this window for the reason that 2015-2016 stretch.
The Nasdaq Composite’s efficiency has been much more troubling, because it seems poised to log its fourth consecutive Santa Claus rally decline—its longest dropping streak on file. Regardless of sturdy total beneficial properties for 2024, together with a 13% rise for the Dow Jones Industrial Common, analysts are sounding alarms in regards to the market’s near-term outlook.
A convergence of technical indicators suggests additional challenges forward. Market breadth, a measure of the variety of advancing versus declining shares, has deteriorated sharply, with the S&P 500 lately enduring its longest stretch of adverse breadth since 1999. Moreover, the index’s incapability to reclaim the important thing 6,000 stage has raised considerations amongst strategists, who view this former assist as a possible resistance.
Momentum shares, which drove a lot of 2024’s beneficial properties, have begun to falter, and technical indicators just like the moving-average convergence-divergence (MACD) have issued promote indicators. Excessive-beta shares—these with the best volatility—have damaged their uptrend, including to fears of a broader market pullback.
Analysts additionally cite rising Treasury yields as a key headwind. The yield on the 10-year Treasury word lately hit a seven-month excessive, placing extra strain on shares. Whereas yields eased on Monday, the S&P 500 nonetheless declined 1.1%, closing at 5,907, as traders grappled with the opportunity of profit-taking and a extra important January selloff.
The Nasdaq Composite and Dow Jones Industrial Common additionally ended the day decrease, with losses of 1.2% and 1%, respectively. Regardless of sturdy yearly beneficial properties, the market’s December struggles and technical indicators counsel that traders is perhaps getting ready for a choppier highway forward in 2025.