Stock Market Outlook: Final Stretch of 2024

As we enter the final trading days of 2024, the stock market is poised to close the year on a high note. With the Nasdaq Composite leading the way, rising over 30% this year, and the S&P 500 gaining 25%, investors are looking forward to a robust year-end performance despite a holiday-shortened trading week.

The Santa Claus Rally

Amidst the Santa Claus Rally, historically one of the most positive stretches for the S&P 500, investors find themselves watching closely. Typically, since 1950, the S&P 500 rises an average of 1.3% over this seven-day period beginning December 24. However, this year’s rally has yet to produce significant gains, with all three major indices experiencing a sell-off. While history suggests a positive start to January if the rally materializes, last year defied expectations.

Will the Rates Rise?

Recently, market dynamics have been influenced by the Federal Reserve’s stance on interest rates. Bond yields have surged, with the 10-year Treasury yield jumping over 40 basis points in December. As yields hover above 4.6%, strategists express concerns that higher rates could weigh on stock performance. Michael Kantrowitz, Chief Investment Strategist at Piper Sandler, notes that rates above 4.5% could become problematic for the broader market.

• Bond Yields Surge: 10-year Treasury yield up over 40 basis points in December.
• Market Sentiment: Higher rates may impact stock performance.
• Strategist Insight: Economic data influencing rates could be positive for stocks.

Economic Releases and Market Reactions

This week, the economic calendar offers updates on housing prices and manufacturing activity, with no major company earnings scheduled. Despite a subdued release schedule, these economic indicators may still sway market sentiment.

• Pendulous Home Sales: November’s data indicates possible market fluctuations.
• Manufacturing Insights: Insights into the Dallas Fed Manufacturing activity expected.

With markets closed on New Year’s Day, the week remains relatively quiet. The ISM manufacturing index and S&P Global US Manufacturing PMI are anticipated to conclude the week, although these numbers may not significantly impact major indices.

Market Fundamentals and 2025 Outlook

Despite recent market setbacks, strategists like Scott Chronert from Citi remain optimistic about the 2025 outlook. Stock valuations remain high, and earnings growth is projected at approximately 15% year over year for the S&P 500. This optimistic forecast hinges on resilient US economic growth.

• Earnings Growth: Anticipated 15% increase year over year for the S&P 500.
• Economic Resilience: US economic growth forecasts remain robust.
• Market Sentiment: High on Citi’s Levkovich Index, indicating bullish investor activity.

Chronert cautions against stretched valuations and market sentiment. A potential catalyst challenging the bullish outlook could introduce volatility in the first half of 2025. However, any sell-offs in early 2025 could present buying opportunities if underlying market fundamentals remain positive.

Weekly Calendar Overview

Here’s an overview of this week’s economic releases and market events:

• Monday: MNI Chicago PMI, Pending Home Sales MoM (November), Dallas Fed Manufacturing Activity (December).
• Tuesday: S&P CoreLogic 20-City YoY (October), Dallas Fed Services Activity (December).
• Thursday: MBA Mortgage Applications, Initial Jobless Claims, S&P Global US Manufacturing PMI, Construction Spending MoM (November).
• Friday: ISM Manufacturing Index, ISM Prices Paid (December).

Strategies Moving Forward

While 2024 concludes on a hopeful note, the focus shifts to the strategies implemented throughout 2025. With macroeconomic indicators such as interest rates playing a crucial role, investors may need to adapt to the evolving market landscape. Keys to success include maintaining a diversified portfolio, being vigilant of economic data trends, and responding swiftly to market conditions.

As we move into the new year, stay updated with Yahoo Finance for the latest developments and insights into the world of finance and investing.

Source: https://finance.yahoo.com/news/stock-market-enters-final-stretch-of-2024-what-to-know-this-week-124721537.html