On Wednesday, December 24th, known as Christmas Eve, both the S&P 500 index and the Dow Jones Industrial Average closed at record highs, while the price of gold remained slightly below $4,500 per ounce, still holding strong. Investors are anticipating the traditional “Santa Claus rally,” which typically includes the last five trading days of the year and the first two trading days of the new year.
The three major U.S. stock indexes all saw gains on Wednesday, with the S&P 500 index set to achieve nearly an 18% annual increase. The Dow Jones Industrial Average rose by 289.40 points, or 0.60%, to 48,731.81 points; the S&P 500 index increased by 22.34 points, or 0.32%, to 6,932.13 points; and the Nasdaq Composite index rose by 51.46 points, or 0.22%, to 23,613.31 points.
The widely followed Volatility Index (VIX) dropped to its lowest point this year. After breaking the $4,500 per ounce threshold for the first time, the price of gold saw a slight decline. Spot gold decreased by 0.17% to $4,480.23 per ounce, while U.S. gold futures rose by 0.01% to $4,483.40 per ounce. Gold prices have risen by 70% so far this year.
Paul Stanley from Granite Bay Wealth Management mentioned that after weeks of turbulence, the stock market has begun to see slight gains in December, coinciding with the expected Christmas rally. Traders are betting on further interest rate cuts by the Federal Reserve next year, which would be positive for precious metals.
The steady year-end trend contrasts sharply with the extreme volatility earlier this year due to trade tensions, which had pushed benchmark indexes on the brink of a bear market. Since then, the stock market has rallied significantly, with each dip being met with record speed buy-ins driven by the fear of missing out.
Market economist Peter Cardillo from Spartan Capital Securities commented, “The stock market has performed well this year, there is no doubt about that, and most global markets have followed suit. It has also been a great year for precious metals.”
Both gold and silver are expected to achieve their best annual performances since 1979, boosted by increased central bank purchases and the influx of funds into Exchange Traded Funds (ETFs). According to data from the World Gold Council, gold-backed ETF total holdings have been increasing every month this year except for May.
Ulrike Hoffmann-Burchardi from UBS Global Wealth Management stated, “We believe investors should prepare for further market gains. We maintain an ‘attractive’ rating on the U.S. stock market. We have identified highly attractive investment opportunities in the technology, healthcare, utilities, and financial sectors, which will lay the foundation for further market gains.”
Economic data showed a surprising 4.5% drop in initial jobless claims last week on a seasonally adjusted basis, while continued jobless claims unexpectedly rose by 2.0% to 1.923 million, aligning with recent consumer surveys indicating weakening job confidence, supporting the case for the Fed to cut rates further over the next year.
Cardillo added, “I think the Fed will cut rates twice in 2026, as the labor market is much weaker than the data suggest.”
Magdalena Ocampo from Principal Asset Management also shared, “We currently expect two rate cuts next year, potentially in the first half, and if the unemployment rate does not spike, a strong economy, cooling inflation, and loose monetary policy should support risk assets.”
Thomas Lee from Fundstrat Global Advisors pointed out, “Seasonal factors remain favorable, and we expect at least a 5% gain in the stock market by year-end. Considering the Fed did not start cutting rates until September 2025, this is the most likely scenario.”
Lee noted similarities between the current situation and those in September of 1998 and 2024 when the S&P 500 index saw a 13% increase in the fourth quarter during both periods.
Stock exchanges across the Atlantic closed early, with European markets nearing historical highs at the end of the shortened holiday trading week, poised for their best annual performance since 2021 in a backdrop of loose interest rates.
The MSCI Global Stock Index rose by 2.41 points, or 0.24%, to 1022.51 points. The pan-European STOXX 600 index fell by 0.01%, while the broader FTSEurofirst 300 index dropped by 0.89 points, or 0.04%.
Emerging market stocks climbed by 5.74 points, or 0.41%, to 1,392.87 points. MSCI’s Asia-Pacific ex-Japan index closed up by 0.35% at 716.93 points, excluding Japan’s Nikkei index, which fell by 68.77 points, or 0.14%, to 50,344.10 points.
U.S. Treasury bond yields declined due to the impact of initial jobless claims data. The yield on the benchmark 10-year U.S. Treasury fell by 3.4 basis points to 4.136%, below the previous day’s close of 4.169%.
The 30-year bond yield dropped by 3.6 basis points to 4.7948%, lower than the previous day’s close of 4.831%. The 2-year bond yield fell by 1.8 basis points to 3.51%, below the prior day’s 3.528%.
The U.S. dollar fluctuated but is on track for its largest annual decline since 2017, as investors weigh the possibility of further Fed monetary policy easing in 2026, potentially leading to continued weakening over the next year. Forex traders are closely monitoring the Japanese yen and being cautious of possible interventions by Japanese authorities.
The U.S. Dollar Index, which measures the dollar against a basket of currencies including the yen and euro, rose by 0.1% to 98.00, while the euro fell by 0.18% to $1.1773.
Crude oil prices retraced earlier gains and ended slightly lower as geopolitical tensions eased. Oil prices are still expected to record their largest annual decline in five years. U.S. crude oil prices remained unchanged at $58.36 per barrel, while Brent crude oil prices dropped to $62.25 per barrel, down by 0.21% intra-day.