As the holiday season approaches, the mood in financial markets often reflects a mix of cheer and cautionParticularly in the United States, the week leading up to Christmas is characterized by thin trading volumes and increased volatility, as traders adjust their positions before the official halt in trading over the holidayOn the eve of Christmas, the U.Sstock market closed early, just three hours before the scheduled end, setting up a quiet pause before the holiday breakThis year, trading concluded on Tuesday at 2 AM Beijing time, with markets entirely closed on Christmas Day.
This time of year typically sees investors bracing for year-end adjustments, influenced by a plethora of economic signalsRecent U.Seconomic data, unfortunately, presented a less than favorable picture, dampening risk appetitesThe consumer confidence index, a critical indicator of economic sentiment, showed a significant decline from 111.7 to 104.7, the lowest level seen in three months and below analysts' expectations
Similarly, durable goods orders for November reflected a concerning decrease of 1.1%, marking the steepest decline since JuneThese figures stirred anxieties among investors, resulting in a notable pullback across major stock indices as markets opened.
However, there were glimmers of positivity buried within these statisticsWhen excluding transportation, particularly aircraft orders, non-defense capital goods orders showed a slight increase of 0.7%. This could suggest a steadier outlook for corporate investments in the long term, hinting at a cautious optimism prevailing among business leadersAdditionally, the housing market showed signs of resilience, with new home sales bouncing back, albeit homeowners faced a steep year-on-year price drop of 6.3%, down to an average of $402,600—the lowest since the beginning of 2022.
The Federal Reserve's new year lineup hints at a potentially polarized stance on policy, moving between hawkish and dovish tones
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Elon Musk expressed his opinions publicly, asserting via X platform that the number of Fed employees is unnecessarily high, calling it 'absurd.' Yet, analysts at Goldman Sachs tempered excitement, suggesting that the prospect of rate cuts before January remains unlikely, as the market continues to digest the signals emitted by the central bank.
Across the Atlantic, the European Central Bank President Christine Lagarde addressed inflation concerns, noting that while the ECB is approaching its 2% inflation target, vigilance is required, particularly regarding service industry prices rising at nearly twice the target rateThe UK’s economic landscape remains turbulent under the newly elected Labour government, with the initial GDP growth for Q3 reported at just 0.1%, subsequently revised to a flat 0%. The pound struggled as economists downgraded growth expectations for the eurozone from 1.2% to 1% in 2025, and similar reductions followed for France and Germany, while Spain's outlook received a minor upgrade.
On December 21, the U.S
government signed an emergency spending bill to avert a shutdown, easing concerns and providing some relief to the markets, which saw positive movement in the wake of the announcementDespite the initial downturn, major U.Sindices saw appreciable gains by Monday, thanks largely to the technology sector's resurgenceThe Nasdaq, primarily composed of tech stocks, rallied nearly 1%, driven by strong performances from semiconductor stocks, which enjoyed a remarkable 3.1% increase.
The historical trend has shown December to be the second-best month for stock performance, with the bulk of these gains typically occurring in the second halfInvestors often anticipate the so-called “Santa Claus rally,” hoping the market can crest new highs as 2024 draws to a closeBy Tuesday's close, the S&P 500 had increased by 0.73% to close at 5974.07 points, the Dow Jones rose modestly by 66.69 points to 42906.95, and the tech-heavy Nasdaq surged, exhibiting robust growth.
Meanwhile, the performance of AI-related stocks was mixed but generally positive, despite some stocks within the sector experiencing declines
Nvidia's holdings in SoundHound AI dropped by over 6%, while other established names like Oracle and CrowdStrike faced minor setbacksConversely, firms like Palantir and BigBear.ai registered marginal gains, underlining the volatile nature of tech stocks, particularly in a market environment still so influenced by macroeconomic factors.
European markets mirrored some of this cautious optimism, closing just above the break-even line, though notable movements included a significant recovery in Novo Nordisk following a steep declineThe pan-European STOXX 600 index edged up by 0.14%, reflecting a mixed landscape across different nations, with fluctuations in the German DAX and the French CAC 40 indices failing to entirely offset gains in others.
The bond market revealed shifting sentiments as the yield curve steepened amid light trading conditionsU.STreasury yields, particularly the ten-year note, rose by over six basis points by the close of trading, as market participants recalibrated their expectations
2025 forecasts suggest that, despite potential trade and tax policy risks, the Fed appears set on a trajectory for rate reductions, with strategists predicting that the two-year Treasury will eventually drop to around 3.75% within the year.
Conversely, the dollar index gained 0.4%, holding firm after reaching a two-year highNotably, the yen fell below the 157 mark amidst a strengthening dollar, while Bitcoin dipped below $93,000, reflecting ongoing volatility in the cryptocurrency sector, notably exacerbated by advancements in quantum computing which some worry could jeopardize blockchain security.
Commodity prices reacted to market dynamics as oil faced downward pressure due to ongoing fears of supply overhang and a stronger dollarOil prices, particularly for West Texas Intermediate (WTI), closed lower at $69.24 per barrel, while Brent crude also saw declines, closing at $72.63. Analysts expect an intensifying supply surplus could drive Brent prices down further, with projections suggesting an average of $70.50 per barrel next year, signaling cautious outlooks for energy markets.
The natural gas market exhibited similar trends, with U.S