[New York Stock Market] Big Tech Leads Broad Gains... Is the 'Santa Rally' Coming?

NVIDIA up 3.69%... Meta also rises over 2%
Shutdown crisis temporarily resolved, inflation below expectations
Market closes at 1 PM on 24th, closed on 25th

The three major indices of the U.S. New York Stock Exchange all closed higher on the first trading day of the Christmas week, December 23 (local time). Big tech companies showed strength, driving the indices upward. With trading volume decreasing ahead of the Christmas holiday, the market is showing expectations for a 'Santa Rally,' where the stock market rises at the end of the year and the beginning of the new year.

On this day at the New York Stock Exchange, the blue-chip-focused Dow Jones Industrial Average closed at 42,906.95, up 66.69 points (0.16%) from the previous trading day. The large-cap-focused S&P 500 index rose 43.22 points (0.73%) to 5,974.07, and the tech-heavy Nasdaq index gained 192.29 points (0.98%) to close at 19,764.88.

By individual stocks, the strength of large technology companies was prominent. AI leader Nvidia jumped 3.69%. Meta, the parent company of Facebook, rose 2.49%, and Tesla increased by 2.27%. Qualcomm rose 3.5% on news of winning a patent infringement lawsuit against ARM Holdings. ARM Holdings fell 4%. Video sharing platform Rumble surged 81.22% on news that Tether would acquire a stake in the company at $7.5 per share.

The federal government shutdown crisis was resolved, and inflation came in lower than expected, positively impacting the market. The U.S. Congress passed a temporary budget bill on the 20th, and President Joe Biden signed it the following day. With the shutdown crisis resolved, a sense of relief spread through the market. The November core Personal Consumption Expenditures (PCE) price index released on the 20th rose 0.1% month-over-month and 2.8% year-over-year, below experts' expectations (0.2% and 2.9%, respectively), stimulating investor sentiment.

On the other hand, consumer confidence released on the same day fell significantly short of expectations. According to the Conference Board (CB), the December Consumer Confidence Index recorded 104.7, below both the expert forecast of 112.9 and November's figure of 112.8.

Investors' attention is focused on whether this year's Santa Rally will unfold. According to stock analysis firm Stock Traders Almanac, since 1969, the S&P 500 index has risen an average of 1.3% during the last five trading days of the year and the first two trading days of the new year. Bank of America (BoA) analyzed that late December is the second strongest period for U.S. stocks during the year, and in election years, the S&P 500 index has risen 83% of the time in December.

Craig Johnson, Chief Market Technician at Piper Sandler, said, "The major upward trend in the market is still intact, so we are not giving up on the possibility of a Santa Rally this year."

However, pessimism about the likelihood of a Santa Rally this year is also considerable. The Federal Reserve (Fed) has indicated a slower pace of interest rate cuts, and debates about the New York Stock Exchange's peak continue. Earlier, at the last Federal Open Market Committee (FOMC) meeting of the year on the 18th, the Fed significantly reduced its forecast for rate cuts next year from four times of 0.25 percentage points each (total 1.0 percentage point cut) to two times of 0.25 percentage points each (total 0.5 percentage point cut). There is also analysis suggesting that the year-end Santa Rally may have been priced in early due to the 'Trump Rally' that caused a sharp rise in the New York Stock Exchange after the election on December 5.

Matt Maley, Chief Market Strategist at Miller Tabak, diagnosed, "Investors are closing out the year facing the reality that the stock market is extremely expensive and that the Fed will not be as cooperative as we thought."

Government bond yields are on the rise. The U.S. 10-year Treasury yield, a global bond yield benchmark, rose 6 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.58%, and the 2-year Treasury yield, sensitive to monetary policy, recorded 4.33%, up 2 basis points from the previous day.

Meanwhile, the New York Stock Exchange will operate on a shortened schedule this week in observance of Christmas. On Christmas Eve, December 24, it will close early at 1 p.m. Eastern Time, and it will be closed on Christmas Day, December 25.