Mixed Markets: Santa Claus Rally Watch

Meanwhile, new labor markets data signaled headwinds for the economy. Continuing unemployment claims jumped to 1.91 million, the highest level in more than three years, highlighting persistent job markets pressures.

Stock market indexes ended mixed on Thursday in their first session after Christmas, dampening the momentum of the Santa Claus rally.

The Dow Jones Industrial Average rose by approximately 29 points, gaining 0.1%, while the S&P 500 dipped slightly to finish nearly unchanged. The Nasdaq also declined modestly, down 0.1%.

These mixed outcomes followed two days of gains, including Wednesday’s strong start to the Santa Claus rally. This period—spanning the final five trading days of the year and the first two of January—has historically delivered average gains of 1.3% for the S&P 500.

This year’s rally kicked off with strength on Christmas Eve, as the Dow surged nearly 400 points and the S&P 500 climbed 1.1%, marking its best Christmas Eve performance since 1974.

Optimism remains among traders hoping for a strong finish to the year, potentially setting the stage for solid gains in 2024. “When the Santa Claus Rally is positive, the S&P 500 typically generates a 1.4% gain in January and an average annual return of 10.4%,” noted Adam Turnquist, Chief Technical Strategist at LPL Financial.

However, Turnquist pointed out that if the rally falters, the S&P 500 tends to deliver flat January results and a more modest annual return of 5%.

Initial jobless claims for the week totaled 219,000, slightly below expectations of 225,000.