Stocks End the Day High as the S&P 500 Nears New Record; Santa Clause Rally Next?
Stocks are closing in on record highs as 2025 draws to a close, but it may not be enough for an anticipated Santa Clause rally.
Quick overview
- U.S. stock futures ended high for the third consecutive session, with the S&P 500 poised to set a new record.
- Lower than expected inflation rates and a recent tech rally are contributing to the upward momentum in the stock market.
- Major technology stocks have seen improved performance, boosting investor sentiment and helping the Nasdaq Composite index recover.
- Despite the potential for a Santa Claus rally being uncertain, the overall market is expected to remain elevated as the year closes.
On Monday, U.S. stock futures ended the day high for the third session in a row and then started off Tuesday with a small uptick above the flatline.
Hopes for a Santa Clause rally may be unfounded at this point, but the stock market is elevated, with the S&P 500 likely to set a new record on Tuesday. Upcoming economic data could give the market a year-end boost, including Q3 GDP and New Residential Sales slated for later in the day.
The S&P 500 is now just 0.3% away from a new record, which it is likely to hit on Tuesday. The stock market has soared so high this year and set so many records that there is less chance of a major rally happening before 2025 is over, but we should continue to see elevated levels across the market.
Minor Rally Expected as Year Closes Out
Several factors are helping keep the stock market moving upward including a lower than expected inflation rate. The rate slowed to 2.7%, which was much lower than anticipated. The declining inflation numbers are partially due to a lack of collection data for October and November during the government shutdown. Inflation was also lower because of decreasing shelter costs which were up by 0.2% between September and November.
The overall stock market level is also helped by a recent tech rally. Over the past few days of trading, selling pressure has eased significantly for major technology stocks, including Nvidia (NVDA), Advanced Micro Devices (AMD), Broadcom (AVGO), and others. All of these stocks have suffered since early November from elevated fears over the future of the AI market. But after positive quarterly earnings and several days of good news for the industry, investor sentiment is shifting in a big way.
Poor technology stock performance drove down Nasdaq’s numbers through much of November and early December, but this recent reversal has helped the Nasdaq Composite index climb back up to a level just below its all-time high. All three indices are looking to end the year very high, especially in comparison to the spring drop off that was brought on by high tariffs. With most tariff concerns in the rearview mirror at this point, the market is free to move forward and set a few new records before the year is up.
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