[New York Stock Exchange] Tech Stocks Rise, Santa Rally Optimism Lifts Markets... S&P 500 Up 0.64%

All three major indexes on the New York Stock Exchange closed higher on December 22 (local time). As the year-end holidays approach, bargain hunting in technology stocks has fueled expectations for a 'Santa Rally.'

On this day, the blue-chip-focused Dow Jones Industrial Average ended the session up 227.79 points (0.47%) at 48,362.68. The large-cap S&P 500 index rose 43.99 points (0.64%) to close at 6,878.49, while the tech-heavy Nasdaq Composite gained 121.209 points (0.52%) to finish at 23,428.829.

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Major artificial intelligence (AI)-related stocks led the overall market gains. Nvidia closed up 1.49% following a Reuters report that it plans to begin shipping its H200 chip to China in February next year. On the same day, Micron Technology rose 4.01%, Oracle gained 3.34%, and Tesla finished up 1.56%.

Amid concerns about overvaluation in technology stocks, the market’s focus is shifting toward relatively undervalued stocks, while investors are watching closely to see if AI-related stocks can maintain their leadership.

Will McGough, Chief Investment Officer (CIO) at Prime Capital Financial, said, “From a market perspective, I don’t think there are many factors that could move stock prices significantly. That’s why everyone is naturally expecting a 'Santa Rally.'” He added that with the S&P 500 index approaching the 7,000 mark, he is watching to see at what level the market will close out the year.

The Santa Rally typically refers to a phenomenon where the stock market shows strength during the last five trading days of the year and the first two trading days of the following year.

The S&P 500 index rose 24% in 2023 and 23% in 2024, and is expected to rise about 17% this year. CIO McGough noted, “The market is expecting 14% earnings growth from 2026 to 2027, which is quite high,” and predicted that there will be challenges along the way, including potential volatility from the appointment of a new Federal Reserve (Fed) chair and the midterm elections.

In addition, Paramount and Warner Bros. Discovery shares surged, closing up 4.25% and 3.53% respectively, after Paramount actively pursued an acquisition of Warner Bros. Discovery. This was influenced by Oracle Chairman Larry Ellison providing a $40.4 billion personal guarantee to support Paramount, which is led by his son.

Korean e-commerce company Coupang fell 3.36% on news that it is facing a class-action lawsuit in the United States.

Wind energy-related stocks were hit hard after the Trump administration halted the construction of all offshore wind power projects in the United States.

Investors are keeping a close eye on the third-quarter gross domestic product (GDP) advance estimate to be released on December 23, as well as the number of new jobless claims due on December 24. The third-quarter GDP release was originally scheduled for October but was delayed due to the federal government shutdown (temporary suspension of operations).

According to the CME FedWatch Tool, the interest rate futures market is currently pricing in a 19.9% probability of a rate cut in January next year, and a 52.9% probability of a cut in March.

Fed Governor Stephen Miran warned in a Bloomberg TV interview that if the Fed does not continue to cut rates next year, there is a risk of triggering a recession.

Geopolitical tensions have driven oil prices sharply higher, while gold and silver reached all-time highs. On the New York Mercantile Exchange, West Texas Intermediate (WTI) crude for the day settled at $58.01 per barrel, up $1.49 (2.64%) from the previous session. This was due to growing concerns over supply disruptions after the United States blocked Venezuelan oil exports.

Yields on U.S. Treasury bonds are on the rise. The yield on the benchmark 10-year U.S. Treasury note stood at 4.165%, unchanged from the previous day, while the yield on the 2-year note, which is sensitive to monetary policy, was at 3.505%, up 1.4 basis points and 2 basis points, respectively, from the previous day (1 basis point = 0.01 percentage points).