The Dow Jones Industrial Average managed to hold onto its pre-Christmas gains in the first trading session following the holiday, while bond yields continued to climb, reflecting ongoing concerns over inflation and government deficits.
The Dow ended with a slight increase of less than 0.1%, continuing a resilient trend observed earlier in the week. The S&P 500 and Nasdaq Composite, however, both saw minimal declines of less than 0.1%. This market behavior points to an ongoing trend of buying into dips, with investors returning to stocks that had underperformed in recent months, such as Dollar Tree, which caters to lower-income consumers affected by inflation.
Despite the slight pullbacks in major stock indexes, investor sentiment remains strong, with equities on track to close the year with solid gains. The Dow has risen approximately 15% year-to-date, the S&P 500 is up by 27%, and the Nasdaq Composite has surged by 33%. This performance is noteworthy given that the Federal Reserve’s rate cuts were less aggressive than anticipated earlier this year, as inflation remains a challenge.
On the bond market side, the 10-year Treasury yield continued its upward trajectory, initially surpassing 4.63% before easing back slightly to 4.577%. Bond investors are expressing concern over inflation and the growing deficit, signaling to policymakers the need for careful consideration in future fiscal policies.
Meanwhile, Japan’s Nikkei 225 experienced a strong performance, rising by 1.1%, buoyed by notable gains in major car companies like Nissan, Mitsubishi, and Toyota. In China, the Shanghai Composite posted a modest 0.1% gain, while the South Korean Kospi saw a slight decline. The global picture remained mixed, with several international stock markets, including those in London, Frankfurt, Hong Kong, and Paris, closed for the holidays.
In the US, there were signs of resilience in the labor market, with fewer initial unemployment claims than expected. However, the number of people continuing to receive unemployment benefits climbed, signaling potential economic challenges ahead. The markets are looking to close the week strong, with the hope of benefiting from the traditional “Santa Claus rally” — the tendency for stocks to rise during the final days of the year.
While trading volumes have been lighter this week, investors are hopeful that the final sessions of 2024 will bring further gains, leading to a positive close for the year. Notably, the S&P 500 has risen 1.8% this week, with major tech stocks such as Tesla, Alphabet, and Apple contributing significantly to the overall performance.
The Wall Street Journal and CNBC contributed to this report.
