Stocks closed higher Wednesday, extending the Santa Claus rally for another day. The main benchmarks have been rallying in recent weeks on hopes that easing inflation will encourage the Federal Reserve to start cutting interest rates early next year – and that momentum continued today.
According to CME Group, futures traders are pricing in a 74% chance for a quarter-point rate cut at the March Fed meeting. Markets also assign a 62% probability to the federal funds rate being an entire percentage point lower in July from its current range of 5.25-5.5%.
Not everyone is taking a glass-half-full approach to interest rates, though. "The stock market is too optimistic about the quantity of rate cuts expected in 2024 and we may be borrowing some of 2024's gains now as the year-end rally continues," says Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"We expect to see three rate cuts in 2024 starting in July and not any sooner than that unless something unexpected happens in the economy that warrants lower interest rates," Landsberg adds.
Santa Claus rally is in full swing
In addition to rate-cut expectations, stocks are getting some seasonality help. Indeed, markets are right in the middle of the so-called Santa Claus rally, a period encompassing the last five trading days of December and the first two trading days in January when stocks historically do well.
"[T]hese 7 days are more likely to be higher than any other 7 days of the year, [with the S&P 500] up 79.5% of the time," writes Ryan Detrick, chief market strategist at Carson Group, on X. The data Detrick cites goes back to 1950, and shows the S&P 500 has averaged a 1.3% gain over the seven-day time frame.
At today's close, the Dow Jones Industrial Average rose 0.3% to 37,656 – a new all-time closing high – and the Nasdaq Composite gained 0.2% to 15,099. The S&P 500, meanwhile, added 0.1% to 4,781, just below its record closing high of 4,796.56 from January 3, 2022. Since its close on Thursday, December 21 – the start of this year's Santa Claus rally – the S&P 500 is up 0.8%.
Apple Watch sales ban temporarily paused
With little in the way of economic data for investors to take in Wednesday, market participants turned to single-stock news. Apple (AAPL, +0.1%), for one, snapped its four-day losing streak after a U.S. appeals court paused a temporary U.S. sales ban on the company's smartwatches until January 10.
Sales of Apple's Series 9 and Ultra 2 smartwatches have been paused since late last week following an October ruling by the U.S. International Trade Commission that found the company had violated a patent for the blood oxygen monitors included in these Apple Watch models.
Tesla stock pops on Model Y buzz
Elsewhere, Tesla (TSLA) jumped 1.9% – gaining $15.1 billion in market value along the way – after a Bloomberg News report suggested the electric vehicle (EV) maker is planning to start production on a revamped version of its mid-size Model Y SUV by the middle of next year.
Tesla has been one of the best stocks on the price charts in 2023, more than doubling for the year-to-date.
Analysts remain skeptical of Tesla's ability to keep the momentum going, though. According to S&P Global Market Intelligence, TSLA stock has a consensus Hold recommendation from the 42 analysts covering it. Plus, the average 12-month price target of $237.10 is below its current share price.
Related content
- Stock Market Holidays in 2024
- What Are the Dogs of the Dow for 2024?
- Best Investing Moves to Make Before the End of the Year
-
Think a Repeal of the Estate Tax Wouldn't Affect You? WrongThe wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
In Your 50s? We Need to Talk About Long-Term CareMany people don't like thinking about long-term care, but most people will need it. This financial professional recommends planning for these costs as early as possible to avoid stress later.
-
Stock Market Today: Investors Look on the Bright SideA generally good week closes on another positive note, as investors, traders and speculators look for fresh catalysts.
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
-
Stock Market Today: Stocks Climb More Walls of WorryVolatility is back in a normal range, and the trend for the main equity indexes remains positive despite specific and general headwinds.
-
Is It Time to Invest in Europe?Stock Market Europe is being shaken out of its lethargy, militarily and otherwise, by Donald Trump's changes in U.S. policy. Should investors start buying?
-
Stock Market Today: Nasdaq Outperforms as Big Tech RalliesThe Dow Jones Industrial Average closed lower for a second day as Amgen and Merck fell.
-
Stock Market Today: UnitedHealth Drags on Dow After CEO SplitsUNH created headwinds for the price-weighted Dow on news that its embattled CEO, Andrew Witty, is stepping down.
-
Stock Market Today: Dow Gains 1,160 Points on U.S.-China Trade DealThe two countries agreed to a 90-day truce that will give them time to work on more substantive trade negotiations.
-
Stock Market Today: Investors Weigh Weekend NegotiationsInvestors, traders and speculators will look to Switzerland for answers about the most compelling issue confronting global markets.
