Tesla & Alphabet rally spurring early Santa Claus rally

November marked the best month of the year for U.S. stocks, with both the S&P 500 and the Dow posting their highest monthly gains of this year. As 2024 comes to a close, investors and traders are eagerly anticipating the potential occurrence of another Santa Claus rally. This time Wall Street giants like Tesla and Alphabet dominate the early Santa stock rally.

The tech-heavy Nasdaq hit a significant milestone by surpassing 20,000 points for the first time on Wednesday, driven by strong performances from these tech giants. The bullish sentiment was also boosted after the latest US CPI inflation data came in line with expectations, paving the way for the Federal Reserve to proceed with another interest rate cut.

However, the Nasdaq slightly retreated on Thursday due to profit taking and higher-than-expected US November PPI numbers dampened investor sentiment. Producer Price Index (PPI) rises to a higher-than-expected 3% in November, the second straight monthly increase. Although the PPI came in higher than expected, the likelihood remains high for the FED to cut interest rates on December 18.

What is a Santa Claus rally?

The Santa Claus Rally refers to a surge in stock prices that typically occurs in the final weeks of December and the first week of the new year, specifically between Christmas and New Year’s Day. The phenomenon was discovered in 1972 by Yale Hirsch, creator of the “Stock Trader’s Almanac”. This positive bullish sentiment can spill over into the other financial markets, driving increased buying activity. For example, in 2008 December, this event occurred when the S&P 500 gained more than 7%. However, there are a few times when the market has fallen during the same period.

Alphabet and Tesla stocks hit new record highs

Tesla (NASDAQ: TSLA) stock jumped to an all-time high on Wednesday, surpassing their prior record in 2021, largely fueled by the recent U.S. presidential election results. After the election, $TSLA has seen a remarkable 66% increase in market value. In November, the stock’s 38% rally marked its best monthly performance since January. Shares of Google parent Alphabet (NASDAQ: GOOGL) posted a spectacular 5.5% gain on Wednesday, reached a new all-time high of $195.60 driven by the announcement of its breakthrough quantum chip, Willow, which has positioned the company at the forefront of technology innovation.

Will the early tech’s Santa Claus rally continue?

Stocks have historically performed well in December. The trends of the last two weeks of 2024 on Wall Street will likely be determined by ongoing evaluations of interest rate movements. Next week’s Fed rate decision and comments from Fed Chair Jerome Powell are expected to play pivotal roles in influencing the trajectory of stock prices. According to the CME’s FedWatch tool, the Federal Reserve (FED) is 98.6% expected to cut interest rates at its meeting next week.

Please note the trading volume is expected to slow down after the next FED meeting with many clocking off ahead of the Christmas and New Year holidays.

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