Christmas is around the corner, but Wall Street isn’t feeling the holiday spirit heading into the week ahead. The S & P 500 and Nasdaq Composite are lower for the month, marking an unusually weak stretch for stocks. December has historically been one of the stronger months for equities, with both benchmarks averaging a gain of more than 1%, according to data from the Stock Trader’s Almanac. The declines put the S & P 500 on track to snap a seven-month rally. On top of that, the index is struggling to hold above its 50-day moving average , as pointed out by BTIG chief market technician Jonathan Krinsky. That’s an indication Santa Claus might leave a lump of coal on Wall Street this year. “There’s a lot of concerns that seem to be potentially hindering an end-of-year rally,” said Justin Bergner, portfolio manager at Gabelli Funds. “Perhaps limiting it to an end-of-year grind, or maybe just an end-of-year churn.” Stock challenges Among the challenges the stock market will have to surmount are troubling signals in the bond market, the portfolio manager warned. A tightening along the yield curve — not just in the U.S. but globally — could draw more dollars to assets outside of equities. Long-dated Japanese bond yields, in particular, have recently drawn investor attention after nearly doubling year to date. There’s more reason to get concerned about the long end of the yield curve. The strong chance that National Economic Council Director Kevin Hassett could become the next Federal Reserve Board chair could worry investors, who fear that aggressive rate cuts that have been touted by Hassett could worsen inflation and cause yields on long-dated bonds to rise. “The bond markets and what they signal are very important for the economy and the equity markets now,” Bergner said. “And we need yields that are neither too hot nor too cold, and we need spreads that are neither too hot nor too cold. And we have those for now.” Then there are other fears. There’s the pending Supreme Court ruling on tariffs that could roil markets if the levies are deemed illegal. Frothy valuations And there are ongoing concerns of an overvalued market, given the frothiness in AI valuations. All of those concerns could mean a stock market that struggles to cross the finish line in a buoyant mood during the final stretch of the year. In December, only the Dow Jones Industrial Average is on pace to notch an eight-month advance, up 0.9%. The tech-heavy Nasdaq Composite is the biggest laggard. Any potential shift will have investment ramifications, as more investors expand into other sectors that are set to benefit in the coming year. Industrials, for example, can benefit from the data center buildout. Or, financials can profit from spread between the short and long end of the yield curve. “Next year, I do think it continues to be supportive for a further rotation to value” stocks from growth, Bergner said. Santa Claus coming? Before 2025 ends, investors still hope to get a visit from Santa Claus. Next week kicks off the Santa Claus rally period. Coined by Yale Hirsch of the Stock Trader’s Almanac in 1972, the typical end-of-year rally occurs over the final five trading days of the year and the first two of the next, and has averaged an S & P 500 gain of 1.3% in just those seven days since 1950. But if recent trading trends hold, the market may continue fizzling into year-end instead. Week ahead calendar All times ET. Monday, Dec. 22 Tuesday, Dec. 23 Real GDP (3Q 1st Reading) GDP Prices (3Q 1st Reading) Industrial Production (October) Durable Goods (October) Industrial Production (November) Wednesday, Dec. 24 NYSE closed after 1 p.m. Thursday, Dec. 25 NYSE closed for Christmas Day. Friday, Dec. 26 — CNBC’s Fred Imbert contributed to this report.
Wall Street heads into the new week with a year-end rally in doubt