The stock market fails to stage a ‘Santa Claus rally’ despite a rough start to 2024
Santa Claus was rarely seen on Wall Street.
As defined in the Stock Trader’s Almanac, the “Santa Claus Rally” refers to a tendency for the S&P 500 to rise during the last five trading days of the year and the first two trading days of the new year.
Since 1950, the Santa Rally has lifted the S&P 500 by an average of 1.3% over seven trading days. The benchmark large-cap index SPX has closed more than 78% of Santa Claus trading windows over the past 75 years and has risen over the past seven years, according to Dow Jones Market Data.
But this time, during the Santa Rally, which runs from December 22 to Wednesday, January 3, the S&P 500 fell 0.9%. This marked the worst performance during the Santa rally since 2015-2016 and marked the seventh consecutive positive Santa stretch, according to Dow Jones Market Data.
The Nasdaq Composite COMP also fell 2.5% during the period, marking its third consecutive negative Santa rally period since Dec. 22, while the Dow Jones Industrial Average DJIA posted a slight gain of less than 0.1% during the period. According to Dow Jones market data.
Some market analysts see the failure to bounce back during that period as a sign of tougher times ahead.
“Years without a ‘Santa Claus Rally’ tended to precede bear markets or periods of significant declines in stock prices at the end of the year,” wrote Jeff Hirsch, editor of Stock Trader’s Almanac & Almanac Investor Newsletter.
U.S. stocks closed lower on Wednesday as most megacap technology stocks fell in the second session to start the new year. Investors appear to be digesting the 2024 monetary policy path following the release of minutes from the Federal Reserve’s last policy meeting while also reassessing the year-end rally that helped the Nasdaq Composite surge 43% in 2023.
The S&P 500 index closed down 0.8% at 4,704 on Wednesday, and the Dow Jones industrials fell 0.8% to 37,430, according to FactSet data. The Nasdaq index closed at 14,592, down 1.2%.
