U.S. stock futures are trading in negative territory after yesterday’s holiday on account of Christmas Day. Market participants will keenly watch for a Santa Rally for 2024-25. The time period for a Santa Claus Rally is the last five trading sessions of the existing year and the first two trading days of the next year. Accordingly, for 2024-25, the Santa Rally dates are Dec. 24, 26, 27, 30 and 31 of 2024 along with Jan. 2 and 3 of 2025.
Since 1950, Wall Street’s broad-market index – the S&P 500 – provided an average return of 1.3% and ended on a positive note in this seven-day time frame, nearly 80% of the time. For 2024-25, only one day of trading has been completed. On Dec. 24, the S&P 500, the Dow and the Nasdaq Composite gained 1.1%, 0.9% and 1.4%, respectively. Trading volume generally remains thin during this period.
However, stock futures are in the red today as yields on U.S. government bonds remain elevated. The yield on the benchmark 10-Year U.S. Treasury Note has jumped 48 basis points to 4.635%. The yield on the short-term 2-Year U.S. Treasury Note has climbed 33 basis points to 4.363%. Similarly, the yield on the 30-Year U.S. Treasury Note has surged 54 basis points to 4.814%.
The reason for this northbound movement of U.S. government bond yields is investors’ uncertainty regarding the Fed’s interest rate cut in 2025. The central bank has reduced the benchmark lending rate by 1% in the last three FOMC meetings of this year. The Fed fund rate is currently in the range of 4.25-4.5%. In December, the Fed’s latest “dot-plot” showed just two rate cuts of 25 basis points in 2025 instead of four indicated in September.
Economic Data
The Department of Labor reported that Initial Claims decreased by 1,000 to 219,000 for the week ended Dec. 21, lower than the consensus estimate of 225,000. Previous week’s data remained same at 220,000. The 4-week moving average was 226,500, an increase of 1,000 from the previous week's unrevised average of 225,500.
Continuing claims (those who have already received government aids and reported a week behind) increased 46,000 to 1.91 million for the week ended Dec. 14. This marked the highest level for insured unemployment since Nov. 13, 2021. The previous week's level was revised downward by 10,000 to 1.864 million from 1.874 million reported earlier.
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