Stock Market Gains Raise Santa Claus Rally Hopes But There Are Risks; Schwab Breaks Out

Wall Street’s major stock indexes finished Monday’s session higher, raising the prospect of a year-end Santa Claus rally. But there’s no guarantee that Santa Claus will deliver on those hopes, as still-lofty tech valuations and a recent clustering of distribution days on the Nasdaq warrant some caution.

Meanwhile, a closer look at IBD MarketSurge charts shows that major indexes are not far from their all-time highs, and rallies could push them to fresh records. However, indexes are also hovering just above their 50-day moving averages. A move lower, such as the Dec. 17 sell-off led by sliding artificial intelligence stocks, could cause technical damage.

The Dow Jones Industrial Average closed up 0.5% on Monday, and the S&P 500 rose 0.6%. The tech-dominated Nasdaq climbed 0.5%.

Merck (MRK) led gains in the Dow, rising more than 3%, followed by JPMorgan Chase (JPM), Salesforce (CRM), and Nvidia (NVDA). The chipmaker is progressing toward shipping its AI chip designed for China, Reuters reported.

Meanwhile, weakness in retail stocks in the midst of the holiday shopping season weighed on Dow members Nike (NKE) and Walmart (WMT). Nike extended losses following its fiscal second-quarter earnings report last week, which topped analyst expectations but showed lower sales in China.

But small-cap stocks stood out in Monday’s session, with their outperformance carrying the Russell 2000 index up by 1.2%. Gains were broad, with the S&P SmallCap 600 also rising, ending up 0.7%. The S&P MidCap 400 gained 0.9%. Dow transports rose 0.7% and Dow utilities picked up 0.3%.

Volume on the New York Stock Exchange and the Nasdaq was lower than it was on Friday. However, the comparisons are likely affected by Friday’s options expiration, which usually leads to higher volume.

The yield on the benchmark 10-year Treasury note rose two basis points to 4.17%.

In commodities, gold prices cleared $4,450 per ounce, hitting a record high. Oil prices rose, with February West Texas Intermediate futures trading at $57.92 a barrel, a 2.5% increase.

Stock Market Awaits Santa Claus

The last five trading days of the year and the first two sessions in January mark the time frame for a Santa Claus rally. Before then, investors have more economic data to consider. On Tuesday, the first reading of the delayed third-quarter gross domestic product report is due. The Census Bureau’s U.S. durable goods report is also set for Tuesday. U.S. GDP is expected to grow 3.2% while durable goods for October are seen falling 1.5% after a 0.5% increase in September.

Also on Tuesday, The Conference Board’s consumer confidence index is projected to come in at 91.9 for December.

Last year, investors were left empty-handed by Santa Claus as the S&P 500, the Dow, and the Nasdaq composite each fell for the period. The S&P 500 gave up 0.53% last year. But on average, the benchmark index has risen 1.26% during that period since 1950, according to Dow Jones Market Data.

On average, the Nasdaq has picked up 1.65% in the Santa period since its 1971 launch. However, the tech-dominated index has fallen in the four previous years during the rally. In 2024, it fell 0.72%.

The Dow lost 0.41% in that holiday window in 2024. But blue chips have gained 1.33% on average, based on data going back to 1950.

Seven breakouts marked Monday’s stock market. Among them, Charles Schwab (SCHW) cleared a 21-week flat base at a buy point of 99.59. First Solar (FSLR) broke out at 281.55. Gold Fields (GFI) tested a 47.18 entry.

View General Market Indicators chart page here.

Please follow VRamakrishnan on X/Twitter for more news on the stock market today.

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