Buzz on Business for December 26th, 2023

A mixed day for stocks and bonds on Friday, but there’s been nothing mixed about the last two months on Wall Street. The rally that began on Monday, October 30^th, powered through to complete its eighth consecutive positive week last week. What has caused this Santa Claus rally? How does it compare to other rallies? Will it continue? Wait. You’re asking me?

Stock Market Report

As we said, markets were mixed on Friday.

• The Dow Jones Industrials closed down eighteen points at 37,386.
• But the S+P 500 was up eight points, almost two-tenths of a percent and starts the day today at 4,755.
• The Nasdaq Composite also gained about two-tenths. It closed 14,993, up 29 points.
• The XRT Retailers were down about three-tenths and closed at $72.04, off $0.20.

Bond Markets

Bonds were also mixed.

• The yield on the two-year treasury was down three ticks and closed at 4.327%
• The Twenty-year was up almost two basis points and now yields 4.216%

Oil and Gold

In keeping with the theme,

• Oil was down fifty-two cents, and a barrel will now set you back $73.39
• Gold? Gold was up $17.80 and now changes hands at 2,069.10 and troy ounce

If a whole bunch of economic data were released the day before a long holiday weekend, and no one was there to hear it, would it still impact the stock market? That’s kind of what happened on Friday. Let’s break it down.

The news continues to be good, or mostly good, especially on the inflation front. Inflation is notoriously hard to control, especially the so-called last twenty yards. But, if three data points make a trend, inflation is clearly in retreat. If inflation is in retreat, can rate cuts be far off?

Historical Rallies of Eight Weeks or Longer

We did a search for rallies that continued uninterrupted on a weekly basis for eight consecutive weeks. There weren’t many. We found seven.

The first one we found began on March 18^th, 1957. The others were in 1958, 1971, 1985, 1995, 2013, 2017

The results after the rallies concluded were mixed; there was not enough there to make any kind of prediction, but only one saw an immediate reversal. Our basic takeaway was that stocks continued to move up.

The gains ranged from 4.57% to 16.31%. Of the eight, the one we’re in came in second with a gain thus far of 14.86%

Will the Santa Claus Rally Continue?

Digging deeper into the data reveals encouraging trends. Building permits and durable goods orders suggest continued economic activity, while new home sales remain steady. Inflation, the market's main concern, appears to be cooling, with both headline and core PCE figures coming in below expectations. This bodes well for potential rate cuts in the future, further fueling the market's upward momentum. While historical comparisons offer no guarantees, the eight-week rally's current strength positions it favorably amongst past surges. With economic data supporting a positive outlook and inflation seemingly under control, the Santa Claus rally may well have more cheer to spread in the weeks ahead.