US Economic Data and Global Market Volatility: Post-Christmas Market Review

US Economic Data and Global Market Volatility: Post-Christmas Market ReviewUS economic data painted a mixed picture last week. On the one hand, initial jobless claims came in at 219,000, below expectations, suggesting a resilient labor market

US Economic Data and Global Market Volatility: Post-Christmas Market Review

US economic data painted a mixed picture last week. On the one hand, initial jobless claims came in at 219,000, below expectations, suggesting a resilient labor market. On the other hand, continuing jobless claims rose to 1.91 million, a three-year high, hinting at potential economic slowdown. Retail sales showed a 3.8% year-over-year increase from November 1st to December 24th, boosted by holiday shopping promotions and last-minute purchases, but also signaling intense market competition.

The US dollar continued its strengthening trend, linked to the market's cooling expectations regarding Trump-era policies and Fed rate cuts. The Japanese yen came under pressure, falling below 158, while the offshore renminbi briefly dipped below 7.31 yuan. Currency market traders anticipate a 38-basis-point Fed rate cut next year, implying roughly a 50% probability of a second 25-basis-point cut. Internationally, the Turkish central bank unexpectedly slashed its benchmark repurchase rate by 250 basis points. Germany, France, Italy, Denmark, the UK, and Canada remained closed for the Christmas holiday. Regarding the situation in the Middle East, the Israeli Prime Minister stated Israel's determination to eradicate the Houthi militia until its objectives are achieved.

US Equity Market Performance: Santa Claus Rally and Individual Stock Dynamics

Investors closely watched for the "Santa Claus rally," with the US equity market experiencing volatility in light trading conditions. The Dow Jones Industrial Average recouped early losses in light trading, narrowly achieving a five-day winning streak, while the S&P 500 and Nasdaq Composite indices saw slight declines. Small-cap stocks performed relatively strongly, with the Russell 2000 index rising 0.9%.

This week saw strong overall performance for US equities, with the S&P 500 up 1.8% for the week, the Dow Jones up 1.1%, and the Nasdaq up 2.3%, largely driven by a strong rebound in large-cap technology stocks. Apple hit an all-time high for the fourth consecutive day. Broadcom rose approximately 2.4%, boosting the chip sector. Drone and quantum computing stocks also saw significant gains.

However, Thursday saw a slight dip in the US equity market, with the Dow Jones falling approximately 182 points at one point, ending its four-day winning streak, but the major indices still ended the week higher, with the S&P 500 up about 1.6% for the week, the Dow Jones up about 0.8%, and the Nasdaq up over 2%.

Specifically, at Thursday's close: the Dow Jones Industrial Average rose 28.77 points (0.07%) to 43,325.80; the S&P 500 fell 0.04%; the Nasdaq Composite fell 0.05%; the Nasdaq 100 fell 0.13%; the Nasdaq Tech Weighted Index (NDXTMC) rose 0.044%; the Russell 2000 small-cap index rose 0.9%; and the VIX volatility index (fear gauge) rose 3.22% to 14.73.

US equity sector ETFs showed mixed performance, with banking ETFs leading gains at over 0.5%, while consumer discretionary ETFs fell approximately 0.4%. Banking ETFs, biotechnology ETFs, and regional banking ETFs rose approximately 0.5%; technology ETFs rose less than 0.1%; global technology ETFs fell less than 0.1%; semiconductor ETFs fell approximately 0.2%; internet ETFs fell over 0.3%; and consumer discretionary ETFs fell approximately 0.4%.

Data from LSEGLipper showed outflows across various asset classes in US funds toward the end of the year. The week ending December 25th saw outflows of $780 million from US short- and intermediate-term investment-grade bond funds; $2.22 billion from high-yield bond funds; $400.4 million from US Treasury funds; $313.5 million from US leveraged loan funds; and $41.6 million from mortgage-related funds.

Big Tech Performance: Apple Hits New Highs, Others Mixed

Among the "Magnificent Seven" tech stocks, Apple rose 0.32%, surpassing $259 and hitting a record high for the fourth consecutive day. Other tech giants showed mixed performance. Tesla fell 1.76%, following Deutsche Bank's prediction of lower-than-expected fourth-quarter deliveries, though Wedbush Securities maintained a bullish outlook. Musk promoted Eli Lilly's weight-loss drug Mounjaro on Twitter, claiming it's superior to Novo Nordisk's Ozempic. Tesla also launched a 30-day free trial of its FSD (Full Self-Driving) program in North America. Nvidia fell 0.21%; the company is expected to release its Blackwell-architecture-based RTX 50-series graphics cards in two weeks and showcase its next-generation GB300 AI server at its GTC conference in March. Meta fell 0.72%; Amazon fell 0.87%; Alphabet (Google Class A) fell 0.26%; and Microsoft fell 0.28%.

Most chip stocks fell, though the Philadelphia Semiconductor Index rose 0.03%. Arm Holdings fell 1.59%; TSMC fell 1.58%; ON Semiconductor fell 1.3%; AMD fell 0.97%; Synopsys fell 0.87%; ASML fell 0.53%; Qualcomm fell 0.52%; KLA fell 0.3%; Marvell Technology fell 0.21%; Intel rose 0.2%; Micron Technology rose 0.6%; Wolfspeed rose 1.16%; and Broadcom rose 2.37%, with Cantor Fitzgerald raising its price target from $250 to $300. Namics Semiconductor rose 3.52%.

AI stocks saw more gains than losses: ServeRobotics rose 24.75%; SoundHoundAI (partially owned by Nvidia) rose 19.71%; BigBear.ai rose 19.3%; BullFrogAI rose 7.01%; C3.ai rose 4.51%; Dell Technologies rose 0.29%; and Oracle rose 0.16%. However, Palantir fell 0.29%; CrowdStrike fell 0.19%; and Advanced Micro Devices (AMD) fell 1.72%. PalladyneAI rose 47.57%.

Chinese Stocks and Cryptocurrency Market

Most Chinese stocks rose, with the Nasdaq Golden Dragon China Index closing up 0.42%. In terms of ETFs, the Invesco China Technology ETF (CQQQ) rose 1.04%; the Direxion Daily FTSE China Bull 3x Shares (YINN) rose 1.01%; and the KraneShares CSI China Internet ETF (KWEB) rose 0.17%. The FTSE A50 futures contract closed up 0.06% at 13,597.000 during the overnight session. Among popular Chinese stocks: Fangdd Network rose 12.96%; Zeekr rose 8.64%; Li Auto rose 3.6%; XPeng rose 2.16%; Nio rose 1.52%; Zhongjin Medical rose 22.45%; Kingsoft Cloud rose 14.35%; Xiaomi ADR rose 0.56%; X3 Holdings rose 3.4%; JD.com fell 0.91%; Pinduoduo fell 0.85%; and Vipshop fell 0.07%.

Bitcoin futures fell over 3%, dipping below $16,500 (Note: This figure seems unusually low compared to recent market prices. Please verify the source data.). Cryptocurrency stocks generally fell, but KULR, which executes a Bitcoin purchasing plan, rose over 40%. KULR Technology Group rose 40.35%, up over 1500% since its November 1st low. The company announced it had purchased $21 million worth of Bitcoin and plans to allocate 90% of its cash to Bitcoin. Bitdeer Technology rose 3.82%; Canaan Inc. rose 1.78%; BTCDigital rose 1.79%; MicroStrategy (a major Bitcoin holder), fell 4.78%, announcing plans to raise $4.2 billion to buy more Bitcoin; Riot Platforms fell 1.03%; Coinbase fell 1.86%; the ETHE Ethereum ETF fell 5.19%; the T-REX2XLNGETF (a 2x leveraged Ethereum ETF) fell 9.02%; and the ProShares Bitcoin Strategy ETF (BITO) [data missing].