Santa Claus was virtually absent from Wall Street.
As defined by the Stock Trader's Almanac, the “Santa Claus Rally” refers to the tendency of the S&P 500 to rise during the last five trading days of a calendar year and the first two trading sessions of the new year.
Since 1950, the Santa rally has lifted the S&P 500 by an average of 1.3% over seven trading days. According to Dow Jones Market Data, the benchmark large-cap index SPX closed the Santa Claus trading window 78% higher over the past 75 years and has gained over that time in the past seven years.
That compares with an average return of 0.2% for the S&P 500 in every seven-day trading window since 1950. The index also closed each seven-day trading window up 58% during the same period, according to Dow Jones Market Data.
But this time, the S&P 500 fell 0.9% during the Santa rally that lasted from December 22nd to Wednesday, January 3rd. According to Dow Jones Market Data, that was the worst performance in a Santa rally period since 2015-2016 and ended a streak of seven positive Santa stretches.
The Nasdaq Composite COMP also fell 2.5% over the period since December 22, posting its third consecutive negative Christmas rally, while the Dow Jones Industrial Average DJIA posted a modest gain of less than 0.1% over the same period . according to Dow Jones Market Data.
If there is no recovery on this stretch, some market analysts will see this as a signal for even tougher price developments.
“Years without a 'Santa Claus rally' tended to precede bear markets or periods in which stocks posted significantly lower prices later in the year,” wrote Jeff Hirsch, editor of Stock Trader's Almanac & Almanac Investor Newsletter.
U.S. stocks ended Wednesday lower as most megacap technology stocks fell for a second time to start the new year. Investors appeared to be reassessing the year-end rally that helped the Nasdaq Composite rise 43% in 2023, while also digesting the policy stance in 2024 following the release of minutes from the Federal Reserve's latest policy meeting.
The S&P 500 lost 0.8% to close at 4,704 on Wednesday, while the Dow Industrials also fell 0.8% to 37,430 and the Nasdaq fell 1.2% to close at 14,592, according to FactSet data.