PAS Weekly Commentary

Santa Claus Makes Early Appearance on Wall Street

The S&P 500 rose 2.3% on Christmas week, as buy-the-dip efforts prevailed in convincing fashion. The Nasdaq Composite (+3.2%) and Russell 2000 (+3.1%) both advanced more than 3.0% while the Dow Jones Industrial Average increased 1.7%.

The market ended a three-day skid with a three-day rally, which saw the S&P 500 circle around its 50-day moving average (4628). All 11 sectors closed higher, led by the consumer discretionary (+3.8%) and information technology (+3.3%) sectors with gains over 3.0%. The utilities sector increased just 0.2%.

There wasn't one specific thing that catalyzed the rally, but there was a belief that market had gotten oversold on a short-term basis and was due for a rebound. Moreover, investors have shown a strong willingness to buy the dip whenever the benchmark index breaches its 50-day moving average.

Other supportive factors included waning concerns about the Omicron variant amid encouraging research and vaccine data, hope that Senator Manchin (D-WV) can get on board with the Build Back Better Act after initially rejecting it, better-than-expected earnings results from Nike (NKE) and Micron (MU), and positive momentum.

At the same time, the market brushed aside concerns about the Fed potentially making a policy mistake next year. It's worth reminding that even if the Fed hikes rates three times, the rate environment will still be relatively accommodative.

The Treasury market softened up amid the bullish price action in equities and some encouraging economic data. The 2-yr yield rose five basis points to 0.69%, and the 10-yr yield rose nine basis points to 1.49% -- steepening the curve.

As an aside, the market rebounded right before the seasonally-favorable Santa Claus rally period, which is defined as the last five trading sessions of the year and first two sessions of the new year. Of course, there's no guarantee the next seven sessions will end with gains.

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Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Data and rates used were indicative of market conditions as of the date shown and compiled by Opinions, estimates, forecasts, and statements of financial market trends are based on current market conditions and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. Each company’s security affects the index in proportion to its market value. NASDAQ Composite Index is a market value-weighted index that measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ stock market. Dow Jones Industrial Average is a widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials, but also includes financial, leisure and other service-oriented firms. Russell 2000 Index measures the performance of the smallest 2,000 companies in the Russell 3000 Index of the 3,000 largest U.S. companies in terms of market capitalization. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

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2021-131462 (Exp. 03/22)