Despite Friday’s strong upward trend, stocks ended the week with losses. The S&P 500 (SPX) was down by 0.48% and the Dow Jones Industrial Average (DJIA) decreased by 0.6%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) declined by 0.51% and 0.68%, respectively.
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On Friday, stocks staged a belated Santa Rally, reversing five days of losses as dip buyers stepped in. The strong surge at the end of the week alleviated some investor worries stemming from the S&P 500’s weakest performance over the three last trading days of the year since the 1950s. All in all, this was the worst December since 2018.
Friday’s gains seemed to dispel the fears connected to the old Wall Street maxim that the absence of the Santa Rally leads to a bear market, driving investors to refocus on the “January Barometer.” The theory, which originated back in the 1972, suggests that January’s market behavior is a predictive indicator of its performance for the rest of the year.
Historically, the “January Barometer” has been accurate about 75% of the time, although many are skeptical, to say the least, about its viability as a forecasting tool, due to the many factors influencing stock returns in any given year. With all due respect to seasons past, investors should continue watching economic reports and other developments directly influencing Federal Reserve’s policies, corporate earnings, and market sentiment.
Three Economic Events
Here are three economic events that could affect your portfolio this week. For a full listing of additional economic events, check out the TipRanks Economic Calendar.
» December’s ISM Services PMI – Tuesday, 01/07 – This report shows business conditions in the U.S. services sector, which contributes over 70% of the U.S. GDP. PMI indices are leading economic indicators used by economists and analysts to gain timely insights into changing economic conditions, as the direction and rate of change in the PMIs usually precede changes in the overall economy.
» December’s Nonfarm Payrolls and Unemployment Rate – Friday, 01/10 – The Nonfarm Payrolls and Unemployment reports present the number of new jobs created during the previous month, along with the percentage of people actively seeking employment in the previous month. These reports are two of the most important economic indicators, as policymakers follow the shift in the number of positions since it is strongly associated with the overall health of the economy. One of the Federal Reserve’s mandates is full employment, and it considers labor market changes when determining its policy decisions.
» January’s Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectations (preliminary readings) – Friday, 01/10 – These reports portray the results of a monthly survey of consumer confidence levels and consumer views of long-term inflation in the United States. The level of confidence affects consumer spending, which contributes about 70% to the U.S. GDP. The inflation expectations index is used as a component of the Fed’s Index of Inflation Expectations calculations.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
