Stocks Rise Monday for Strong Start to Santa Claus Rally

Last Updated: Wednesday, January 5, 2022 3:40 PM | Neal Farmer

Markets got off to a strong start coming off Christmas as optimism for a Santa Claus Rally grows during a light economic data week on lower-than-usual trading. A light data filled week coincides with just two expected earnings reports coming from Cal-Maine Foods (CALM) on Tuesday and FuelCell Energy (FCEL) on Wednesday. Meanwhile, China’s central bank surprised traders over the weekend when it pledged further support for the economy while other central banks are tightening policy to fight inflation.

Santa Claus Rally

Heading into the Christmas holiday stocks were pulling back from highs while the Omicron variant spread, high inflation continued, and Biden’s Build Back Better plan faced new major roadblocks. The downward turn was worrying for breaking the trend of a Santa Claus Rally lasting from the last week of December to the first two trading days of January. The average return during that time is 1.4% over the past 45 years with 34 of those 45 years seeing markets rise.

Many believed the rally would occur again this year though as the fall before Christmas likely meant many would see it as a “buy the dip” opportunity and some of the reasons for the bearish turn were being reversed. Coronavirus cases are certainly spiking at the moment but the Omicron variant appears to be far less lethal than the original virus, although it does appear to spread even more easily. Additionally, President Biden’s Build Back Better infrastructure bill is receiving renewed life after failing to receive support from the Senate.

Those updates along with a low volume market as many institutional investors enjoy the holiday season, have resulted in a strong start to the rally. Of course, a little Christmas cheer may just be the majority of the reason for markets rising as good moods and bonuses can certainly help push stock prices higher.

Economic Data

A pretty light week is headlined by initial and continuing unemployment claims data. Initial claims are expected to fall from 205,000 to 190,000 claims as new claims remain low and even below where they were before the pandemic.

Additionally, new housing data is set to release early in the week as FHFA Housing Price Index and S&P Case-Shiller Home Price Index November data comes out Tuesday morning followed by MBA Mortgage Applications Index and Pending Home Sales November data on Wednesday.

Lastly, Retail and Wholesale Inventories data for November also releases Wednesday along with EIA Crude Oil and Natural Gas Inventories.

Economic Events this Week

Tuesday - 9:00 a.m. - FHFA Housing Price Index - 9:00 a.m. - S&P Case Shiller Home Price Index

Wednesday - 10:00 a.m. - Pending Home Sales - 10:30 a.m.- EIA Crude Oil Inventories

Thursday - 8:30 a.m. - Initial & Continuing Claims

Friday - 9:45 a.m. - Chicago PMI

Earnings Reports This Week

Tuesday:

After the bell: CALM

Wednesday:

Before the bell: FCEL

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