Here is Schwab's early look at the markets for Monday, December 29.
Another truncated trading week begins today, with markets closing early Wednesday and shut Thursday for the New Year's holiday. Action on Wall Street could be light, with stocks squarely in the "Santa Claus rally" period that stretches the last five trading days of the old year and the first two of the new.
Major U.S. indexes behaved well for Santa last week, climbing to new all-time highs intraday Friday before back tracking late in the session. The S&P 500 index rose 1.4% overall, its fourth gain in the last five weeks. However, volume is traditionally low this time of year, raising questions about the rally's relevance. With volume light, conviction may not be fully behind this move higher, and next week could tell the tale when most participants return.
Though the days ahead are light on earnings, data's on the way. Investors will monitor housing numbers from November's pending home sales report at 10 am ET today and await October's S&P Cotality Case-Shiller home price index at 9 a.m. ET tomorrow.
With mortgage rates slowly coming down, pending home sales have risen for three straight months while home prices have appreciated on an annual basis for four straight months. The home prices index rose 1.4% in September, but gains eased for the eighth straight month and represented the smallest increase in more than two years. If the trend continues, it might mean prices are finally starting to reflect weak housing demand to some extent.
The Federal Reserve's meeting minutes from December follow the housing reports at 2 p.m. ET tomorrow, potentially providing investors with a better idea of the outlook for interest rates among the divided members of the central bank.
Minutes could also provide more clarity on the economic projections policy makers delivered several weeks ago, which were notably rosy in terms of inflation, growth, and unemployment. It might be interesting to find out why officials see this sort of progress, especially considering the recent weakness in consumer sentiment.
Treasury yields finished mixed Friday with declines for the short end of the curve and a gain for the 30-year. The benchmark 10-year yield ended the day unchanged at 4.14%, down just one basis point for the week and in the upper end of its near-term range.
The futures market priced in a 19% chance of a January rate cut as of late Friday, according to the CME FedWatch Tool. Chances have fallen since last week's surprisingly firm U.S. third quarter Gross Domestic Product (GDP) report. However, fourth quarter GDP is widely expected to soften thanks to the long government shutdown.
Market participants see growing chances of a rate cut by the time of the Fed's March meeting, where chances top 50% of rates being down at least a quarter point from the current 3.5% to 3.75%.
"We expect the Fed to lower the target range to somewhere in the 3% to 3.5% range over the next year, implying two to three additional 25-basis-point rate cuts," wrote Kathy Jones, chief fixed income strategist, and Collin Martin, head of fixed income research and strategy, Schwab Center for Financial Research, in a recent post. "The sharp slowdown in hiring over the past few months and rise in the unemployment rate are raising concerns among some Fed members about a slowdown in the labor market."
Treasury trading this week could see influence from the government's auctions later this morning of 3-month and 6-month bills. Considering the time of year, demand might be light and results might be discounted by the market with so many participants likely away.
As far as earnings this week, investors won't have too much to monitor other than a few more small and micro-cap reports.
Major indexes wavered Friday in light holiday trading before closing lower but just off all-time highs. By midday, volume at the New York Stock Exchange was just 170 million, compared with the average of 307 million. Things were even more subdued over at the Nasdaq, with only about half the average volume. The trend of decliners outpacing advancers continued from earlier in the week—potentially something to track in coming days for signs of any sentiment shift.
That said, the S&P 500 Relative Strength Index topped 61 by late Friday, well above mid-month lows that fell beneath 50. A 61 is considered relatively strong but not overbought, and 61% of S&P 500 stocks now trade above their 50-day moving averages, up from 30% a month ago and a sign that the rally has lifted many stocks, not just the biggest whales. This is considered healthy in terms of momentum.
Checking sectors Friday, things looked mostly red. One exception was info tech, lifted by Nvidia and strength in several other semiconductor names. Materials got a boost from rising metals prices. While seven of 11 S&P 500 sectors were lower by late in the session, none of the losses exceeded 0.5%, a sign of the tepid trading that kept price moves limited much of the day.
Nvidia climbed more than 1% Friday following news it's entered an inference technology licensing agreement with AI chip start-up Groq that it says will "accelerate AI inference at (a) global scale." As part of the agreement, Groq will remain independent but its team will join Nvidia to help advance and scale the licensed technology. The agreement is valued at $20 billion.
Warner Brothers dropped 1.4% after the New York Post reported that the company wants Paramount to increase its hostile offer.
Target jumped 2.6% Friday after the Financial Times reported that Toms Capital Investment Management had built a stake in shares.
Shares of cruise lines including Norwegian Cruise, Royal Caribbean, and Carnival fell moderately Friday but news was thin. Some of the pressure potentially reflected profit taking after their recent surge, Briefing.com noted.
Freeport-McMoran climbed more than 2% as gold prices notched another record high Friday to close above $4,500 an ounce. Gold has been soaring as the dollar weakens and the Fed cuts rates.
Palantir dipped 2.8% Friday but news was thin, and the move could represent profit taking after shares put on a sharp rally over the last month before stalling near $200.
The Dow Jones Industrial Average® ($DJI) fell 20.19 points Friday (-0.04%) to 48,710.97 ; the S&P 500 index (SPX) shed 2.11 points (-0.03%) to 6,929.94, and the Nasdaq Composite® ($COMP) lost 20.21 points (-0.09%) to 23,593.09.
For the week, the DJIA rose 1.2%, the S&P 500 index gained 1.4%, and the Nasdaq climbed 1.2%.