Stocks opened higher in the final session of 2024 but quickly ran out of steam. At the close, the Dow Jones Industrial Average was down 0.07% at 42,544, the S&P 500 was off 0.4% to 5,881, and the Nasdaq Composite was 0.9% lower at 19,310.
This week’s price action puts the so-called Santa Claus rally at risk – and that has historically spelled trouble for January returns.
The Santa Claus rally is “officially defined as the last five trading days of the year plus the first two trading days of the new year,” says Adam Turnquist, chief technical strategist for LPL Financial. “Since 1950, the S&P 500 has generated average and median returns of 1.3% during this period, widely outpacing the market’s average seven-day return of 0.3%.”
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Turnquist adds that when stocks deliver a positive Santa Claus rally return, the S&P 500 has averaged a January return of 1.4%. However, “when Santa doesn’t show up and stocks are lower over this period, the S&P 500 has generated an average January return of -0.02%,” he notes.
Since the start of this year’s Santa Claus rally, the S&P 500 is down 1.5%.
Stocks finish 2024 with big gains
Even with the stock market’s end-of-year slump, the main benchmarks finished the year with noteworthy gains. The Nasdaq led the way with its more than 28% return, boosted by another strong year for artificial intelligence (AI) bellwether Nvidia (NVDA). The S&P 500 added 23% to mark its first back-to-back 20%+ annual returns since 1997 and 1998, according to FactSet Research.
And the Dow Jones Industrial Average gained almost 13% thanks to strength in NVDA, which replaced embattled chipmaker Intel (INTC) in the 30-stock index in mid-November. Retail giant Walmart (WMT) and credit card company American Express (AXP) were also top-performing Dow Jones stocks in 2024.
Bitcoin, gold boom in 2024
Investors’ insatiable appetite for riskier assets helped bitcoin surge more than 120% this year, even though the cryptocurrency ended 2024 on a quiet note.
Gold was another big winner this year, boosted by the Federal Reserve’s rate-cutting campaign. For all of 2024, the precious metal rose nearly 29%.
Meanwhile, crude oil prices notched an annual return of just 0.1%, which the International Energy Agency said was due in part to a slowdown in China’s economy.
10-year Treasury yields rise to end 2024
It was another rough year in the bond market thanks to an end-of-year surge in Treasury yields.
The yield on the 2-year Treasury note slipped 1.4 basis points Tuesday to 4.24%, but it remains well above the 3.5% level seen in September. The 10-year Treasury yield rose 2.8 basis points today to 4.573% – a massive increase from the 3.6% yield at the end of Q3. (A basis point = 0.01%.)
What’s in store for 2025?
Plenty of Wall Street’s top minds expect the bull market to continue in the new year, even though positive catalysts that drove stocks higher in 2024 could be fewer and farther between.
“Inflation pressures are lingering, interest rates are rising, and geopolitical threats are significant,” says Jeffrey Buchbinder, chief equity strategist at LPL Financial.
Still, Buchbinder says the third year of a bull market has historically been strong in the absence of recession, with the S&P 500 averaging a 5.2% gain. Additionally, the Fed is expected to cut rates two more times and the Trump administration is likely to push through business-friendly policies – all of which could help the S&P 500 notch a third straight year of gains.