Stock Market Update: Thursday, Dec. 24, 2020
Wall Street traded in a tight range with the major indexes settling mixed for the shortened session after Republicans blocked attempts to alter a $2.3 trillion coronavirus aid and government spending package — and more in Thursday’s stock market update.
President Donald Trump’s demand for extensive changes and leaving benefits for millions of Americans is now at risk with House Speaker Pelosi saying the chamber will hold a vote on the stimulus-check increase Monday.
Stock Market Update
The S&P 500 was up 0.4% after settling on its session peak of 3,703.
The Nasdaq gained 0.3% with the midday high reaching 12,833.
The Dow climbed 0.2% after topping out at 30,209.
The Russell 2000 dipped 0.2% with the intraday low hitting 1,997.
For the week, the Russell 2000 rallied 1.6% and the Nasdaq rose 0.4%. The Dow advanced 0.2% while the S&P 500 slipped 0.2%.
Real Estate was the strongest sector after rising 1% while Utilities and Technology were higher by 0.7%. Energy was the only sector laggard after falling 0.6%.
Stock Market Movers
Shares of Alibaba Group Holding Ltd. (NYSE: BABA) sank 13% after Chinese regulators said they had launched an antitrust investigation into the country’s biggest technology company for suspected monopolistic behavior. The Chinese government is increasing its oversight of large tech companies and, in particular, has cracked down on CEO Jack Ma’s tech empire.
An analyst from Raymond James said he was not surprised by the announcement of the investigation given his previously expressed view that the company’s biggest risk from the country’s antitrust guidelines was the practice of exclusive relationships.
He believes the most likely outcome is the termination of these exclusive relationships, while adding shares are largely pricing in these concerns and would remain a buyer. The analyst kept a Strong Buy rating on Alibaba with a $330 price target.
Stock Market Outlook
While December has been another solid month for the stock market, the official “Santa Claus rally” is just getting underway. The seven-day trading period starts on Christmas Eve and ends during the first week of January. Any gains help aid December in being the best performing month of the year for the stock market.
According to historical data dating back to 1950, the S&P 500 has posted an average return of 1.3% and is positive 78% of the time during the last five trading days of December and the first two trading days of January.
While Wall Street is looking for a strong finish to end 2020, if a Santa Claus rally doesn’t materialize, it could serve as a warning sign that January might see a weak start for the stock market.
Over the past 20 years, the five times the stock market posted negative returns during the Santa Claus rally period, the month of January settled lower each time.
Global Economy
European markets closed mostly higher following news the United Kingdom and European Union have agreed on a trade deal ahead of the December 31st deadline. However, the trade agreement still has to be ratified by the U.K. and EU parliaments in the coming weeks.
Germany’s DAX 30 jumped 1.3% while the Belgium20, the Stoxx 600 and UK’s FTSE 100 nudged up 0.1%. France’s CAC 40 slipped 0.1%.
Asian markets showed strength with China’s Shanghai bucking the trend after dropping 0.6%.
South Korea’s Kospi soared 1.7% and Japan’s Nikkei rose 0.5%. Australia’s S&P/ASX 200 climbed 0.3% and Hong Kong’s Hang Seng added 0.2%.
U.S. Economy
There was no major economic news on Thursday.
Market Sentiment
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) rebounded after tapping a high of $157.43. Current and lower resistance at $157-$157.50 was recovered. A close above the latter would indicate a retest towards $158-$158.50 and the 50-day moving average.
Support is at $156-$155.50 with backup help at $155-$154.50.
Volatility Index
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) extended its losing streak to three sessions after trading down to 21.39. Prior and upper support at 21.50-21 was breached and held. A close below the latter would suggest another backtest towards 20.50-20.
Lowered resistance is 22.50-23 followed by 24-24.50.
Stock Market Analysis
The Wilshire 5000 Composite Index (NYSE: WLSH) was up for the third straight session with the intraday high reaching 39,181. Current and lower resistance at 39,200-39,300 was challenged but held. A move above the latter and last week’s all-time peak at 39,292 would indicate momentum towards 39,400-39,500.
Support is at 39,000-38,900 with a close below the 38,500 level signaling a possible near-term top.
RSI (relative strength index) has been flatlining with key resistance at 70 holding. A close above this level would indicate additional strength towards 75-80 and levels from late August/early September. Support is at 65-60.
Sector
The SPDR S&P Homebuilders ETF (NYSEArca: XHB) remains in a six-session trading range following the intraday bounce to $59.30. Near-term and lower resistance at $59-$59.50 was cleared and held. A close above the latter and last Friday’s all-time peak at $59.72 would signal additional strength towards $60.50-$61.
Support is at $58.50-$58 followed by $57.50-$57.
RSI is back in an uptrend with lower resistance at 65-70 holding. A move above the latter would suggest additional strength towards 75-80 and levels from August. Key support is at 60.
Check back after the closing bell for the most important news and numbers in the WealthPress stock market update.