U.S. stocks managed to recover from a lower open on Thursday, though market momentum remained lackluster as Wall Street’s attempt at continuing the “Santa Claus rally” faced some headwinds following the strongest Christmas Eve session since 1974.
After starting the session in the red, the three major averages gradually reduced their losses and turned positive. As of midday, the benchmark S&P 500 (SP500) was up by 0.05% at 6,043.02 points, the tech-heavy Nasdaq Composite (COMP:IND) was up by 0.01% at 20,033.91 points, and the blue-chip Dow (DJI) had gained 0.14%, reaching 43,357.24 points.
Out of the 11 S&P sectors, eight were in the green, signaling some positive movement, although overall market sentiment remained subdued.
A surge in bond-selling also weighed on equities, driving U.S. Treasury yields higher. The 10-year Treasury yield (US10Y) reached its highest level since May, climbing 2 basis points to 4.61%, while the 2-year yield (US2Y) was up nearly 1 basis point to 4.36%.
The markets saw a sharp surge on Tuesday, setting the stage for what is known as the Santa Claus rally, a phenomenon described by stock market expert Yale Hirsch. It typically refers to a period of gains that occur during the final five trading days of the year and the first two of the next year. On Wednesday, the S&P 500 posted its first +1% gain on Christmas Eve since 1974, according to Bespoke Investment Trust.
However, economic data on Thursday dampened investor sentiment. The U.S. Department of Labor reported that the number of Americans filing for initial jobless claims last week fell to 219,000. More notably, claims for insured unemployment climbed, hitting its highest level since November 2021. This increase in continuing claims suggests a rise in unemployment, which could be a signal that wage growth may slow in the coming year. Pantheon Macro analysts predict a modest rise in real after-tax income in 2025, forecasting just a 1.5% increase.
In Thursday’s active stocks, those linked to Bitcoin (BTC-USD) faced declines in tandem with the cryptocurrency’s retreat. MicroStrategy (MSTR) saw a drop of 3.3%.
In summary, while U.S. stocks turned positive after an early dip, broader market sentiment remained fragile amid concerns over rising Treasury yields and mixed economic signals.
