Wall Street's primary indexes all finished the day in positive territory on tuesday, driven by increases in large-cap and growth stocks during a shortened christmas Eve trading session. Both the Dow Jones Industrial Average and Nasdaq Composite enjoyed four consecutive days of gains, while the S&P 500 extended its winning streak to three days, signifying the initial day of the seasonal Santa Claus rally. Earlier this month, the Dow experienced a decline for 10 straight sessions, its longest losing stretch since 1974.
Large-cap stocks significantly impact the markets, making their performance a crucial factor for the indexes. This effect is heightened when trading volumes are low and limited catalysts are present, as many traders take a break for the holidays. All of the so-called Magnificent Seven large-cap tech stocks increased in value on tuesday, led by a 7.4% surge in Tesla's shares.
The automaker's best daily performance in six weeks helped elevate the consumer discretionary sector by 2.6%. It was the top-performing sector in the S&P, with all 11 sectors finishing in the green. In addition, semiconductor companies also saw strong performance, with Broadcom and Nvidia increasing by 3.2% and 0.4%, respectively, while Arm Holdings rallied by 3.9%, recovering most of its losses from the previous day's court ruling.
Growth stocks advanced even as U.S. Treasury interest rates remained high—the benchmark 10-year note yielded approximately 4.61% on tuesday, its highest rate since May. Typically, increased debt costs would hinder growth stocks. However, the long-term trends surrounding technological advancements, particularly in artificial intelligence, outweighed any short-term fluctuations in Treasury rates, according to charlie Ripley, senior investment strategist for Allianz Investment Management.
"This reinforces the perception that the sector will stay strong and should continue to thrive into the new year," he commented. The S&P 500 rose by 65.97 points, or 1.10%, to reach 6,040.04 points, while the Nasdaq Composite increased by 266.24 points, or 1.35%, to settle at 20,031.13. The Dow Jones Industrial Average climbed by 390.08 points, or 0.91%, to 43,297.03.
On tuesday, stock markets closed at 1:00 p.m. ET and will not reopen until after christmas on Wednesday. Following an impressive surge to all-time highs post-November U.S. elections, which raised expectations for pro-business policies under President-elect Donald Trump, Wall Street's ascent encountered a challenge this month. Investors are now considering the implications of rising interest rates set for 2025.
The Federal Reserve reduced borrowing costs for the third time this year last wednesday but indicated only two additional 25-basis-point cuts for the next year, down from its september forecast of four reductions, as policymakers evaluate the potential for Trump's initiatives to trigger inflation. According to Ripley from Allianz, the elements that fueled the market's rise over the past two months remain in place, and the Fed’s actions have not derailed the rally.
"Looking ahead to 2025, the environment appears favorable," he said, pointing to aspects such as economic prospects, consumer spending in the U.S., and the labor market. Stocks linked to cryptocurrencies also saw gains on tuesday, with Microstrategy, Riot Platforms, and MARA Holdings rising between 4.7% and 8.1%, as bitcoin prices increased. NeueHealth skyrocketed by 75% after the healthcare firm announced that New Enterprise Associates, its largest stakeholder, along with a group of existing investors, would take the company private in a $1.3 billion transaction.
American Airlines' stock inched up by 0.6% after seeing a decline for much of the trading day, as the airline temporarily grounded all its flights in the U.S. on tuesday due to an unspecified technical problem.
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