U.S. Market Awaits Santa Claus Rally Amid Economic Uncertainty

U.S. stock index futures were slightly down on Christmas Eve trading as markets faced mixed economic signals. While the S&P 500 reached record highs, concerns about consumer confidence and factory production simmered amidst hopes for a 'Santa Claus rally'. Traders anticipate further monetary easing despite recent volatility.

U.S. stock index futures experienced a slight dip during the shortened Christmas Eve session, as investors monitored the potential for extending record stock gains during the traditionally strong holiday period. Tuesday saw the S&P 500 closing at an all-time high, buoyed by large-cap technology stocks. Meanwhile, mixed economic data created an uncertain outlook for the future.

According to government figures, the U.S. economy grew at its fastest rate in two years during the third quarter, despite a federal government shutdown delaying the report. Meanwhile, December's declining consumer confidence and stagnant factory production in November highlighted ongoing economic challenges. Despite this, traders are anticipating two interest rate cuts by the end of 2026 per LSEG data, although the likelihood of a cut in January has decreased from 18% to 13% following recent data.

The possibility of a 'Santa Claus rally' has further fueled optimism. Characterized by end-of-year gains in the S&P 500, this period began on Wednesday and extends through January 5. Although trading volumes are expected to remain below average due to the holiday, all major indexes are projected to record a third consecutive annual gain on market optimism around AI, rate cuts, and a resilient economy.

(With inputs from agencies.)