Investors Eye Santa Claus Rally as Holiday Week Winds Down

Santa Claus rally in sight?
As the holiday-shortened trading week comes to a close, investors are hoping for a Santa Claus rally to push stocks higher. The S&P 500 Futures were flat early Tuesday, while Nasdaq 100 Futures added 0.04%, and Dow Jones Industrial Average Futures remained around the flatline (Investing.com, 2024). Traders are optimistic that the market will end the year on a strong note, with the S&P 500 up 1.8% so far this week and the Dow up 1.1% (NBC New York, 2024).

The tech sector has been a significant driver of market performance during the holiday season. On Tuesday, December 24, 2024, tech stocks added to their strong start to the week, with the so-called Magnificent 7 jumping. Tesla Inc. (NASDAQ:TSLA) jumped over 7%, and Apple Inc. (NASDAQ:AAPL) gained 1.2%, while other tech giants including Amazon.com Inc. (NASDAQ:AMZN), Meta Platforms Inc. (NASDAQ:META), and Alphabet Inc. (NASDAQ:GOOGL) also climbed (Investing.com, 2024). This positive sentiment towards tech stocks contributed to the overall market rally, with the S&P 500 climbing 1.1% and the NASDAQ Composite advancing 1.4% (Investing.com, 2024).

Semiconductor stocks have also been a key driver of market performance during the holidays. On the same day, chip stocks added to gains as the Biden administration initiated a new trade investigation into Chinese-made legacy chips. The probe may result in additional tariffs on Chinese semiconductors, underscoring ongoing tensions in the global tech supply chain. Broadcom Inc. (NASDAQ:AVGO) jumped over 3%, while Intel Corporation (NASDAQ:INTC) gained 1% (Investing.com, 2024). This positive sentiment towards semiconductor stocks further boosted the overall market performance.

Investors are hopeful that the Santa Claus rally will help the market end the year on a high note, especially after a tumultuous week. The S&P 500, on average, adds 1.3% in the last five trading days of the year and the first two in January, according to the Stock Trader's Almanac (Investing.com, 2024). The second half of December is also typically the second-strongest period of the year for U.S. equities, and the S&P 500 has been up 83% of the time in December of presidential election years (Bank of America, 2024).

However, not all sectors have performed well during the holiday season. The SPDR S&P Retail ETF (XRT) has been down over 3% this month, with notable losers including Signet Jewelers, down 19%, and Foot Locker, off more than 14% (Investing.com, 2024). Despite these setbacks, investors remain optimistic about the prospects for a Santa Claus rally.

In conclusion, investors are looking to close out the holiday-shortened week higher, with the tech and semiconductor sectors driving market performance. The Santa Claus rally is in sight, and investors are hopeful that the market will end the year on a strong note. However, not all sectors have performed well during the holiday season, and investors should remain cautious as the market approaches the end of the year.