Stock Market Analysis for December 27, 2024

As we step into the last trading session of 2024, the stock market is experiencing a mix of optimism and caution, following a volatile week driven by multiple global events and economic indicators.

Market Recap of the Previous Week

The last week of trading saw the S&P 500 end roughly flat, accumulating a slight loss of 0.3%. However, tech stocks continued to show resilience, with the NASDAQ increasing by 1% thanks to robust earnings reports from key companies.

Key developments that shaped the market this past week include:

• Inflation Data: A report released on December 24 indicated that inflation remains stubbornly high at around 4.5%. The core inflation rate edged up slightly, leading to concerns about potential interest rate hikes early in 2025.
• Federal Reserve Announcements: Fed Chair Jerome Powell hinted at a possible shift in monetary policy depending on inflation trends in a speech on December 25. Traders are now digesting these hints and adjusting their strategies accordingly.
• Global Tensions: Ongoing geopolitical tensions in Eastern Europe and a surprising increase in oil prices have also influenced market sentiments. Investors are wary of potential disruptions in global supply chains.

Key Events to Watch for Next Week

• December Jobs Report: Scheduled to be released on January 5, this report will provide insights into the employment situation in the U.S. and may influence Federal Reserve policy.
• Earnings Season Outlook: Investors will start focusing on earnings guidance from companies as the 2024 earnings season kicks off in January, particularly in the tech and consumer sectors.
• Economic Indicators: Manufacturing and service sector indexes will be released next week, providing further insights into the economic landscape.

Recommendations for Today’s Trading

As the market opens today:

• Buy Recommendations:

• Technology Select Sector SPDR Fund (XLF): Strong demand in tech amidst uncertainties makes this ETF a solid buy for exposure to major tech stocks.

• Vanguard Total Stock Market ETF (VTI): This ETF is diversified across various sectors, making it a good long-term investment as we prepare for the new year.

• Sell Recommendations:

• Energy Select Sector SPDR Fund (XLE): Given the recent spike in oil prices and potential demand drops, it might be wise to take profits on energy-related stocks.

• Global X Lithium & Battery Tech ETF (LIT): This sector has seen rapid growth, but with rising interest rates and economic uncertainty, a short-term sell may be prudent.

Conclusion

In conclusion, investors should brace for a mix of opportunities and challenges as 2024 winds down. With crucial economic reports scheduled for next week, remain vigilant and adjust your portfolios accordingly. Staying informed and agile will be key to navigating these turbulent market waters.