The US stock market performed exceptionally well this week, with all three major indexes recording eight consecutive weekly gains. The Dow Jones Industrial Average rose 0.22% this week, the S&P 500 Index rose 0.75%, and the Nasdaq rose 1.21%.
Christmas is approaching in the West, and next week's macroeconomic data and US stock earnings reports are relatively light. Therefore, the biggest focus for the next week will be whether US stocks can continue their recent gains under the support of the "Santa Claus market".
Thanks to the boost in the prospect of interest rate cuts by the Federal Reserve, the Dow Jones Industrial Average has hit a new historical high for five consecutive trading days, and the S&P 500 index has also briefly approached historical highs. However, all three major indices fell by over 1% on Wednesday. Some analysts attribute it to low trading volume, active zero day option trading, and profit taking by some investors. However, the US stock market quickly rebounded, continuing to rise on Thursday and Friday.
At this month's interest rate meeting, Federal Reserve officials hinted at three rate cuts next year, igniting market optimism. Although several Federal Reserve officials attempted to pour cold water afterwards, investors did not believe their statements and still believed that decision-makers would soon cut interest rates.
The Chicago Federal Reserve's interest rate observation tool shows that investors are currently betting on a nearly 90% chance that the Fed will cut interest rates in March next year.
Edward Jones Senior Investment Strategist Angelo Kourkafas said, "People will continue to believe that the Federal Reserve will shift towards a dovish direction, which provides support for the market and sentiment, and this is unlikely to change next week."
Hennion& Kevin Mahn, President and Chief Investment Officer of Walsh Asset Management, said that investors holding large amounts of cash may seek entry next week because they are afraid of missing out on the stock market rebound, also known as "FOMO" sentiment. FOMO stands for fear of missing out in English.
Mahn added, "I think the market is a bit rushed based on the magnitude of the rebound so far, but I think the market may slightly rise from this week's level simply due to the 'FOMO' sentiment."
In addition, next week is expected to see the "Santa Claus market". From the historical records of the past 70 years, it can be seen that during the 7 trading days starting from Christmas, which is the last five trading days of each year and the first two trading days of the following year, the US stock market is likely to perform strongly. Therefore, these 7 trading days are also known as the "Santa Claus market".
Overview of important economic events next week:
Monday (December 25th): Bank of Japan Governor Kazuo Ueda delivered a speech at a meeting of the Tokyo Federation of Economic Organizations
Tuesday (December 26th): US October FHFA House Price Index Monthly Rate, US October S& P/CS 20 Major City Housing Price Index Annual Rate, Dallas Fed Business Activity Index for December in the United States
Wednesday (December 27th): The Richmond Fed Manufacturing Index for December in the United States and the Bank of Japan announce the opinions of the December Monetary Policy Meeting Review Committee
Thursday (December 28th): Monthly rate of US November completed housing contract sales index, API crude oil inventory for the week ending December 22nd, and initial unemployment claims for the week ending December 23rd
Friday (December 29th): Chicago PMI in the United States and Switzerland's December KOF Economic Leading Indicators