Jamie Spencer
Stocks saw slight gains on Thursday in the first trading session of the new year, as investors expressed cautious optimism that the market could sustain the momentum that delivered two consecutive years of annual gains above 20% for the S&P 500. However, lingering challenges, particularly from the tech sector, tempered the upbeat start.
Modest Gains and Mixed Performance
The Dow Jones Industrial Average rose 105 points, or less than 0.3%, while the S&P 500 and Nasdaq Composite posted gains of under 0.5%. Early trading was more robust, with the Dow climbing more than 300 points at its session high before gains reversed in late morning trading.
Mixed performances among major stocks influenced the market’s trajectory. Apple fell over 2%, while Tesla dropped about 5% after reporting a decline in annual deliveries for 2024. On the positive side, Nvidia rose 2.7%, helping offset some of the losses from other Big Tech players.
Santa Claus Rally Unlikely
The market’s modest gains followed a disappointing close to 2024. The S&P 500 ended the year up 23% but recorded four consecutive down days to close the year, a streak not seen since 1966.
This losing streak casts doubt on the likelihood of a “Santa Claus rally,” a market phenomenon where stocks typically rise during the final five days of the year and the first two trading days of January. Historically, this period yields an average gain of 1.3% for the S&P 500 and has been positive nearly 80% of the time since 1950, according to Dow Jones data.
Optimism Amid Concerns
The tech-heavy nature of 2024’s rally has raised questions about sustainability. However, some investors remain optimistic, citing continued economic growth and earnings expansion. UBS strategist Jonathan Golub noted:
“The argument that irrational exuberance, animal spirits and bubble-like optimism were the primary drivers behind the market’s levitation seem largely inconsistent with stronger data and more subdued recession risks.”
Golub acknowledged investor optimism heading into 2025:
“Either way, it is clear that investors are extremely optimistic as we enter 2025. Maybe this exuberance is reason for concern. Maybe 2025 will be another gangbuster year.”
Encouraging Economic Data
Economic reports, though sparse during the holiday-shortened week, provided some support for market sentiment. A jobless claims report on Thursday showed declines in both initial and continuing unemployment claims, suggesting resilience in the labor market.
While stocks opened the new year on a positive note, mixed performances and uncertainties in the tech sector temper the enthusiasm. Optimistic economic indicators and earnings growth may bolster investor confidence, but questions about market sustainability linger. As 2025 unfolds, the balance between optimism and caution will shape market trajectories in the months ahead.
