(Dec 24): A relatively quiet session on Wall Street ahead of Christmas saw stocks wavering near all-time highs as traders digested the gains of the past few sessions while parsing a reading on the jobs market.
Investors hoping for a “Santa Claus Rally” — which typically encompasses the last five trading sessions of the year and the first two of the new one — saw the S&P 500 little changed at the start of that period. Bonds fluctuated and the dollar remained at the lowest since October. Gold hovered near a record.
The subdued action contrasts with the extreme turbulence driven by the tariff storm earlier in the year that put the equity benchmark on the brink on a bear market. Since then, stocks surged, with every dip being bought at record pace and the fear of missing out dominating sentiment.
While the impressive rally briefly stalled as exuberance over artificial intelligence was questioned in the final stretch of the year, bets the Federal Reserve will have further room to cut rates in 2026 kept fueling optimism over Corporate America’s profits.
“We believe investors should position for further advances in equity markets,” Ulrike Hoffmann-Burchardi at UBS Global Wealth Management said this week. “We maintain our attractive rating on US equities. We find compelling opportunities in tech, health care, utilities, as well as financials, which should broaden the foundation for further gains.”
See also: S&P 500 wavers at end of its best week in a month
As traders parsed the latest economic data, they’re sticking with their call that the Fed makes two quarter-point reductions in policy rates next year, one more than officials’ median forecast.
Applications for US unemployment benefits fell last week, highlighting the seasonal swings in the data at this time of year. Wednesday’s figures are consistent with a labor market seeing relatively low layoffs, a trend that has remained intact throughout the year despite heightened economic uncertainty.
“For now, we expect two rate cuts next year, likely in the first half, and, provided unemployment doesn’t spiral, a resilient economy, cooling inflation and easier policy should be supportive for risk assets in the year ahead,” Magdalena Ocampo at Principal Asset Management said this week.
See also: S&P 500 closes at record high in tech-led advance
The S&P 500 was little changed. The yield on 10-year Treasuries declined one basis point to 4.15%. The dollar fell 0.1%. Trading at the New York Stock Exchange wraps up at 1pm local time, while the recommended close for Treasuries is one hour later.
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