S&P 500 Faces Rare Back-to-Back Losses During Historically Bullish Santa Claus Rally
For the second consecutive year, the S&P 500 is set to end the typically bullish “Santa Claus rally” period in the red, leaving investors without the usual holiday cheer. This streak marks a rare occurrence, as such back-to-back declines have happened only twice since 1950, according to Dow Jones Market Data.
The Santa Claus rally refers to the seven trading days spanning the final five sessions of December and the first two of the new year. Historically, the S&P 500 has gained an average of 1.3% during this period and finished higher nearly 80% of the time. However, in 2024, the index has dropped 1.1% since the rally began, putting it on track for its weakest performance during this window since the 2015-2016 stretch.
The Nasdaq Composite’s performance has been even more troubling, as it appears poised to log its fourth consecutive Santa Claus rally decline—its longest losing streak on record. Despite strong overall gains for 2024, including a 13% rise for the Dow Jones Industrial Average, analysts are sounding alarms about the market’s near-term outlook.
A convergence of technical indicators suggests further challenges ahead. Market breadth, a measure of the number of advancing versus declining stocks, has deteriorated sharply, with the S&P 500 recently enduring its longest stretch of negative breadth since 1999. Additionally, the index’s inability to reclaim the key 6,000 level has raised concerns among strategists, who view this former support as a potential resistance.
Momentum stocks, which drove much of 2024’s gains, have begun to falter, and technical indicators like the moving-average convergence-divergence (MACD) have issued sell signals. High-beta stocks—those with the highest volatility—have broken their uptrend, adding to fears of a broader market pullback.
Analysts also cite rising Treasury yields as a key headwind. The yield on the 10-year Treasury note recently hit a seven-month high, putting additional pressure on stocks. While yields eased on Monday, the S&P 500 still declined 1.1%, closing at 5,907, as investors grappled with the possibility of profit-taking and a more significant January selloff.
The Nasdaq Composite and Dow Jones Industrial Average also ended the day lower, with losses of 1.2% and 1%, respectively. Despite robust yearly gains, the market’s December struggles and technical signals suggest that investors might be preparing for a choppier road ahead in 2025.
