Stock Market Today: Santa Claus rally has S&P 500 eyeing record
The S&P 500, which is up 24% for the year, could test its all-time closing high this week as bets on spring Fed interest rate cuts drive another Santa Claus rally.
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U.S. equity futures moved higher Tuesday, kicking off a so-called Santa Claus rally. Investors looked to close out an impressive year for stocks on a high note, powered by renewed bets on Federal Reserve interest-rate cuts and on falling energy prices.
The Santa Claus rally, typically defined as the five-day trading period from after Christmas through the day after New Year's, has delivered investors an average gain of around 1.3% since the Stock Market Almanac began tracking the timeframe in 1969.
Investors are looking for similar gains this year from the S&P 500, which is up more than 4% so far this month and nearly 16% from its late-October lows, as the broadest measure of U.S. shares looks to test its record close of 4,796.56, reached in early January 2022.
Last week's softer-than-expected reading of the Fed's preferred inflation gauge, the PCE price index, is likely to fuel that run to a record, as data indicated that price pressures last month fell for the first time in three years.
The Fed's favored core reading, meanwhile, is now trending at the central bank's preferred 2% target, based on data compiled over the past six months, cementing the case for spring rate cuts.
The CME Group's FedWatch tool, which tracks trading odds on central bank rate moves, puts the chances of a March cut at around 77%, with the odds of a follow-on move in May pegged at 76.6%.
The new rate assumptions have the U.S. dollar index trading near a five-month low against a basket of its global peers of 101.735. Two-year Treasury note yields are holding at around 4.337%, having shed some 71 basis points since the start of the fourth quarter.
Wall Street is likely to ride the rate-bet momentum again Tuesday, but thin post-holiday trading volumes, as well as major market closures in Europe and Asia, are likely to keep activity muted.
Futures contracts tied to the S&P 500 are indicating a 7 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 60 point advance. The tech-focused Nasdaq is called 20 points higher.
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