Stock Market Analysis for December 25, 2024

Overview

As we close out 2024, the stock market appears volatile following a series of economic indicators and geopolitical events that have shaped investor sentiment over the previous week.

Key Events Impacting the Market

1. Interest Rate Changes: The Federal Reserve is expected to make a decision on interest rates in the next FOMC meeting scheduled for January 3, 2025. Market participants are on edge as inflation numbers have shown signs of stubbornness despite previous rate hikes.
2. Global Tensions: Heightened tensions in the Asia-Pacific region have raised concerns over production chains, especially in semiconductor-related stocks. This has added to the anxiety around global growth, weighing heavily on tech-heavy indices.
3. Earnings Reports: Several major companies, particularly in the retail sector, reported their Q4 earnings last week. Wal-Mart (WMT) and Target (TGT) beat expectations, signaling resilience as consumer spending remains robust despite inflation concerns.

Market Performance Review of Last Week

Last week, the S&P 500 closed down approximately 2% while the NASDAQ saw a steeper decline of about 2.5%. This shift reflects a general risk-off sentiment as investors reassess their positions heading into the holiday season and the new year.

Upcoming Events to Watch

• Economic Data: Key economic indicators such as consumer confidence and retail sales will be released during the upcoming week. These data points will influence market sentiment, especially as we head into 2025.
• End-of-Year Tax Strategies: Investors looking to manage capital gains before the year’s end may lead to increased volatility.

Buy/Sell Recommendations

Buy:

• SPDR S&P 500 ETF (SPY): Given the market’s expected recovery post-Fed announcement, accumulation around the current price level may present a strong long-term opportunity.
• Invesco QQQ Trust (QQQ): Tech stocks are likely to rebound once geopolitical tensions ease and if earnings reports remain strong, making this ETF a good addition.

Sell:

• Energy ETFs (e.g., XLE): With fluctuating oil prices and potential overexposure in the energy sector, trimming positions may be prudent, especially as we approach a potential correction.
• Consumer Discretionary Names: Stocks heavily tied to consumer spending may see short-term weakness, and reallocating into more defensive ETFs may be wise.

Conclusion

As we approach the new year, positioning for a potential rebound while being mindful of market volatility is crucial. Keeping a diversified portfolio and staying abreast of economic indicators will be essential for navigating the uncertainties ahead.