The Dow and broader U.S. stock market advanced on Thursday, as the century old Santa Claus rally showed signs of returning this year.
Gains were modest but broad-based in the first trading session after Christmas. The blue-chip Dow Jones Industrial Average (DJIA) rallied as much as 61 points, or 0.2%, to reach 28,577.69. The index is currently trading around 32 points shy of an all-time high.
The broad S&P 500 Index of large-cap stocks climbed 0.3% to 3,231.30, where it was on track for a new record high. Shares of financials and consumer discretionary companies led the advance. Meanwhile, industrials and communication services stocks lagged.
The Nasdaq Composite Index rose 0.4% to 8,987.00, putting it on course for its eleventh consecutive gain. The technology-driven index has closed in record territory for nine consecutive days.
The prospects of another Santa Claus rally are high this year after a red hot November and December pushed equities into record territory.
As The Wall Street Journal reports, the Santa Claus rally is a century-old trend where stocks perform well in the period between Christmas and shortly after the new year. Since 1900, the Dow has risen 76% of the time during this period. Since inception, the S&P 500 and Nasdaq have turned positive results more than three-quarters of the time.
Several factors have underpinned the stock market’s resurgence in the fourth quarter, chief among them being the Federal Reserve’s accommodative stance on monetary policy. The U.S. central bank is pumping the system with liquidity, both directly and indirectly, after it became apparent that so-called ‘quantitative tightening’ was putting a dent in economic growth.
A preliminary trade deal between the United States and China has also reassured investors that an all-out trade war between the two superpowers could be avoided. Even with a partial deal in place, strategists have warned that the emergence of competing trade blocs is one of the biggest macro risks for 2020. Trade blocs are the second biggest risk for next calendar year, according to Morgan Stanley.
In terms of economic data, the number of Americans filing for first-time unemployment benefits declined more than expected last week. Jobless claims for the week ended Dec. 21 dropped by 13,000 to a seasonally adjusted 222,000, the Labor Department reported Thursday. Analysts in a median forecast called for a fall to 224,000.
Claims are correcting lower after spiking during Thanksgiving. Prior to that, they had fallen back to multi-year lows.
Investors will have to wait until Jan. 10 to receive the December nonfarm payrolls report. Hiring picked up more than expected in November with 266,000 jobs created.
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Last modified: January 22, 2020 11:40 PM UTC