Wall Street will try to maintain year-end momentum in the final week of 2023

Published Fri, Dec 22 20232:07 PM ESTUpdated Fri, Dec 22 20234:25 PM EST

Wall Street will attempt a strong finish to a surprising — and at times frustrating — year for markets during the holiday-shortened week ahead, as 2023 draws to a close. Seasonally speaking, investors are heading into a strong period for markets, as the final stretch of the year is the time for the "Santa Claus Rally." Coined by the Stock Trader's Almanac founder Yale Hirsch, the "Santa Claus Rally" refers to the gains typical of the final five trading days of the year, and the first two of the new year. Since 1969, the S & P 500 has gained 1.3% on average during this period. But some traders are skeptical a substantial rally will materialize after a dovish pivot this month from Federal Reserve Chair Jerome Powell caused a major run-up in stocks that some worry has overextended itself. As of Thursday's close, the S & P 500 is on the cusp of all-time highs on both an intraday and closing basis. The record close of 4,796.56 and intraday all-time high of 4,818.62 both date back to January 2022. The broad market index on Friday was about 1% away from both milestones. .SPX 5Y mountain S & P 500 Jay Hatfield, CEO at Infrastructure Capital Advisors, expects stocks may run into some technical resistance as they approach those levels. He noted they appeared to have done so Wednesday when the S & P 500 registered its worst day since September , while the Dow and Nasdaq notched their worst trading sessions since October. "We're likely to kind of stall out, low volume, to be kept out probably somewhere around this 4,800 level," Hatfield said. "We would say it's a good time to go on vacation." On Friday, stocks notched an eighth straight week of gains , a winning streak the S & P 500 last achieved in 2017, and the Dow in 2019. The S & P 500 is up 0.8% for the week, while the Dow has a gain of 0.2%. The Nasdaq is up about 1.2% during the period. The chances of a 'Santa Claus Rally' In any given year, the "Santa Claus Rally" is more likely to appear than not. But a failure of the typical year-end gains to materialize may be a poor indicator as investors head into next year, according to the Stock Trader's Almanac's current editor Jeff Hirsch. "Failure to have a Santa Claus Rally tends to precede bear markets or times when stocks could be purchased at lower prices later in the year," Jeff Hirsch wrote in a recent blog post. "Down SCRs were followed by flat years in 1994, 2005 and 2015, two nasty bear markets in 2000 and 2008 and a mild bear that ended in February 2016." "As Yale Hirsch's now famous line states, 'If Santa Claus should fail to call, bears may come to Broad and Wall,'" Jeff Hirsch added. If that happens, BTIG's Jonathan Krinsky on Thursday noted it would be "another interesting stat to think about as we head into '24. If there was ever a year that could be set-up for a down SCR period, this year might be it considering the run we just had into it." Wall Street will get a final slate of economic data points next week to confirm the recent downward trend in inflation and a cooling economy. On Tuesday, the October FHFA Home Price Index and S & P/Case-Shiller Home Price Index should give traders further insight into the housing market. On Friday, the November reading of wholesale inventories, a measure of unsold goods held by wholesalers, is set for release. Broadly speaking, however, traders expect that stocks will continue their upward trend next week in a sleepy week that's expected to be light on volume. As of Friday's close, the Dow and S & P 500 are now more than 15% above their late October lows. The Nasdaq Composite is higher by more than 19%. "The gains that we've seen during the beginning of the month have been pretty strong, so I think it's probably unlikely that you get a significant upward move next week from here just because things seem pretty extended," said Nathan Kotler, head of trading at GenTrust. "But in the absence of some sort of exogenous shock, I see no reason why markets couldn't continue to sort of slowly drift higher next week," Kotler added. Markets are closed Monday for Christmas Day. Week ahead calendar All times ET. Monday, Dec. 25, 2023 Markets closed Tuesday, Dec. 26, 2023 8:30 a.m. Chicago Fed National Activity Index (November) 9 a.m. FHFA Home Price Index (October) 9 a.m. S & P/Case-Shiller Composite 20 HPI (October) 10:30 a.m. Dallas Fed Index (December) Wednesday, Dec. 27, 2023 10 a.m. Richmond Fed Index (December) Thursday, Dec. 28, 2023 8:30 a.m. Continuing Jobless Claims (12/16) 8:30 a.m. Initial Claims (12/23) 8:30 a.m. Wholesale Inventories preliminary (November) Friday, Dec. 29, 2023 9:45 a.m. Chicago PMI (December) — CNBC's Michael Bloom contributed to this report.