U.S. stocks may face challenges in maintaining their upward momentum on Wednesday, as index futures suggest a flat start. In the absence of significant catalysts, the market might experience a lack of direction, especially given the low trading volume typical of the holiday period, which could cast doubt on any substantial moves in either direction. However, optimistic expectations of economic momentum carrying into the new year, fueled by anticipated Fed rate cuts and a soft-landing scenario, coupled with the traditional year-end buying trend, may help prevent a large-scale sell-off.
Cues From Tuesday's Trading:
The market exhibited strong gains on Tuesday after the extended weekend, with small-cap stocks taking the lead. Despite a brief dip into negative territory for the Dow Industrials in early trading, it swiftly recovered and remained in positive territory for the rest of the session.
The Nasdaq Composite and the broader S&P 500 Index showed strength throughout the session, extending their winning streak for a third consecutive day. Both indices closed at fresh two-year highs, and the S&P 500 approached its all-time high of 4,818.62 (intraday) reached on Jan. 4, 2022.
The Nasdaq Composite’s intraday peak stands at 16,212.23, achieved on Nov. 22, 2021, while the Dow Industrials are trading below their all-time high of 37,641.30 reached last week.
The all-time closing highs for the three indices are 4,796.56 (Jan. 3, 2022), 16,057.44 (Nov. 19, 2021), and 37,557.92 (Dec. 19, 2023), respectively.
Tuesday saw broad-based buying interest in the market, with energy, real estate, and utility stocks leading the gains.
In recent sessions, small-cap stocks, represented by the Russell 2,000 index, have outperformed their larger counterparts, settling at their highest level since April 2022 on Tuesday.
Describing the week’s performance as the calm before the storm, fund manager Louis Navellier stated, “This week is the last great buying opportunity for many stocks.” He added, “I expect that most stocks will meander higher on light trading volume before gapping higher in the New Year when trading volume naturally rises.”
US Index Performance On Tuesday
| Index | Performance (+/-) | Value |
| Nasdaq Composite | +0.54% | 15,074.57 |
| S&P 500 Index | +0.42% | 4,774.75 |
| Dow Industrials | +0.43% | 37,545.33 |
| Russell 2000 | +1.24% | 2,059.19 |
Analyst Color:
The major averages have been on an eight-week-winning run. If history is anything to go by, investors can look ahead to more gains over the next year, according to an analyst.
LPL Financial’s Chief Technical Strategist Adam Turnquist said returns for the S&P 500 after registering an eight-week win streak have been constructive, as 12-month returns have averaged 8.9%, with nearly 90% of the 18 occurrences producing positive results.
“Consistent buying pressure of this magnitude is not only rare but a bullish sign for improving investor sentiment and market momentum,” the analyst said. “And while all winning streaks eventually end, history suggests the rally may not.”
Futures Today
Futures Performance On Wednesday
| Futures | Performance (+/-) |
| Nasdaq 100 | +0.05% |
| S&P 500 | +0.01% |
| Dow | +0.0% |
| R2K | +0.20% |
In premarket trading on Tuesday, the SPDR S&P 500 ETF Trust SPY edged down 0.1% to $475.60 and the Invesco QQQ ETF QQQ gained 0.04% to $410.83, according to Benzinga Pro data.
Upcoming Economic Data:
The Richmond Fed’s manufacturing and services indices for December will be released at 10 a.m. ET. The manufacturing index is expected to show continued contraction, with a score of -7 compared to -5 in November.
At 10:30 a.m. ET, the Dallas Fed is due to release its services revenue for December.
The Treasury is scheduled to auction five-year notes at 1 p.m. ET.
See also: Futures Vs. Options
Stocks In Focus:
- Coherus BioSciences, Inc. CHRS climbed over 36% in premarket trading after the company said it received an FDA nod for its Udenyca Onbody, the company’s on-body injector presentation of Udenyca, a pegfilgrastim biosimilar administered the day after chemotherapy to decrease the incidence of infection as manifested by febrile neutropenia.
- Apple, Inc. AAPL was on track to fall for a fifth straight session as the company contests a U.S. government ban on the sale of some of its Apple Watches in the U.S. due to patent infringement claims.
Commodities, Bonds, Other Global Equity Markets:
Crude oil futures fell 0.74% to $75.01 in early European session on Wednesday following Tuesday’s nearly 2.41% rally.
The benchmark 10-year Treasury note fell 0.016 percentage points to 3.87% on Wednesday.
Among the rest of the global equity markets, Asian stocks advanced across the board Wednesday, led by Japan and Hong Kong. The markets in the region reacted to the positive close on Wall Street overnight and also digested the Chinese industrial profits data which showed a more modest drop of 4.4% for the 11 months ended November 2023 compared to a 7.8% decline for the January to October period.
In Hong Kong, gaming stocks rose after China hinted at softer regulations for the sector.
The major European markets, which re-opened after the Christmas and Boxing Day holidays, were modestly higher by late-morning trading on Wednesday. The STOXX EURO 50 Index was up 0.28% at the last check.
In the currency market, the dollar was weaker against most major currencies, save the Canadian dollar and the Japanese yen.
Most cryptocurrencies were higher over the past 24 hours, with Bitcoin BTC/USD rising modestly as it attempts to reclaim the $43,000 mark.
Photo via Shutterstock
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