Wall Street was choppy during the first half of trading but rebounded with the major indexes closing higher as traders focused on the two Senate races in Georgia — and more in Tuesday’s stock market recap.
Although the results won’t come until later in the evening, or possibly Wednesday, the stock market seems to be predicting the Republicans will win one or both races.
The Russell 2000 surged 1.7% after tagging an afternoon high of 1,990.
The Nasdaq soared 1% with the late-day peak reaching 12,828.
The S&P 500 rose 0.7% after trading to a second-half high of 3,737.
The Dow gained 0.6% following the intraday run to 30,504.
Energy and Materials paced sector leaders after rallying 4.5% and 2.3%. Real Estate and Utilities were the only sector laggards after falling 0.1% and 0.02%, respectively.
Shares of FuboTV Inc. (NYSE: FUBO) zoomed nearly 13% to snap a seven-session slide after announcing preliminary fourth-quarter revenue and subscriber results. The company said paid subscribers at year-end should exceed 545,000, an increase of more than 72% year-over-year. Prior guidance was estimated to be 500,000-510,000 subscribers. Additionally, FuboTV reported preliminary fourth-quarter revenue of $94-$98 million versus forecasts north of $87 million.
The official “Santa Claus rally” came to a close with the seven-day trading period that started Christmas Eve and ended Tuesday — producing a positive result. The S&P 500 moved from 3,690 to 3,726 with the gains aiding December in being the best-performing month of the year from a historical perspective.
However, most of the research on monthly trends in the stock market finds the “January effect” to be the real king of seasonal trends. Current statistics show that in 85 of the past 130 years, the stock market has risen in January with the figures even higher for other markets around the world. For instance, January has been a positive month 71% of the time in the UK, 74% in Japan and 78% in Australia.
While it is important to note the Dow and the Nasdaq closed higher over this time frame, the Russell 2000 (2007) lost ground during the Santa Claus rally. If there is a January effect, it tends to affect small caps more than mid or large caps because they are less liquid.
Since the beginning of the 20th century, the data suggests that small caps have outperformed the overall market in January, especially toward the middle of the month. In recent years, the January effect has typically started in mid-December.
While both stock market theories are fun to track, a better strategy is to maintain a long-term investment outlook and not be tempted by the promise of “Santa Claus rallies” or “January effects.”
In the European stock market recap, indexes closed mostly lower following a new national lockdown in Britain to curb the surge in coronavirus cases.
Germany’s DAX 30 lost 0.6% and the Belgium20 fell 0.5%. France’s CAC 40 was off 0.4% and the Stoxx 600 slipped 0.2%. The UK’s FTSE 100 advanced 0.6%.
Asian markets settled mixed despite renewed hopes of more policy support and ample liquidity from China.
South Korea’s Kospi soared 1.6% and China’s Shanghai rose 0.7%. Hong Kong’s Hang Seng was up 0.6%. Japan’s Nikkei was down 0.4% and Australia’s S&P/ASX 200 slipped two points, or 0.03%.
Chain store sales increased 0.5% compared to the last week of December. On a 12-month basis, December sales posted a 5.1% year-over-year clip from 5% previously. Sales were boosted by post-holiday bargain hunting and gift card redemptions with some discounters noting shopping patterns seemed to be reverting to more normal patterns.
ISM Manufacturing Index climbed 3.2 points to 60.7 in December, topping forecasts for a reading of 56.5, and follows November’s -1.8 point drop to 57.5. Gains were broad-based, led by a 12.2 point rise in the prices paid index to 77.6. The employment component was up 3.1 ticks to 51.5 after plunging -4.8 points to 48.4 previously. Production increased 4 points to 64.8 from 60.8 in November while new orders bounced 2.8 points to 67.9 following the -2.8 slide to 65.1 previously. New export orders dipped -0.3 ticks to 57.5 from 57.8, with imports at 54.6 from 55.1.
Cleveland Federal Reserve President Loretta Mester said policy should remain accommodative. She expects an economic slowdown in the first part of the year that would not require a change in policy — as long as the medium-run outlook remains intact. The strengthening in growth she expects to see later this year would not necessitate a change in the Fed’s policy stance because she expects the economy will remain far from the Fed’s employment and inflation goals.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) fell for the second straight session after testing an intraday low of $155.66. Near-term and upper support at $156-$155.50 was breached but held. A close below the latter would signal additional weakness towards $155-$154.50 with the early December low at $154.77.
Lowered resistance is at $157-$157.50 with more important recovery hurdles at $158 and the 50-day moving average.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the third time in four sessions with the afternoon low tapping 24.80. Current and upper support at 25-24.50 and the 50-day moving average was breached but levels that held. A close below the latter would suggest another retest towards 23.50-23.
Resistance is at 27.50-28 followed by 29.50-30 and the 200-day moving average.
The iShares Russell Growth 1000 ETF (NYSE: IWF) rebounded after testing a second-half high of $239.25. Current and lower resistance at $239-$239.50 was cleared but held. A close above the $240 level would signal a retest towards the $242-$242.50 area with last week’s all-time peak at $242.82.
Near-term support is at $237-$236.50 followed by $235.50-$235.
RSI is back in an uptrend with key resistance at 60 holding. A move above this level would suggest additional strength towards 65-70 with the latter holding since early December. Support is at 55-50.
The Materials Select Sector SPDRFund (NYSE: XLB) was up for the third time in four sessions after tapping a fresh all-time peak of $73.51. Uncharted territory and lower resistance at $73.50-$74 was tripped but held. A close above the latter would signal momentum towards $75-$75.50.
Support is at $71.50-$71 followed by $70.50-$70.
RSI is back in an uptrend with key resistance at 60 getting cleared and holding. Continued closes above this level would signal additional strength towards 65-70 with the latter representing the early November top. Support is at 55-50.
Check back after the closing bell for the most important news and numbers in the WealthPress stock market recap.