Stock Market Update: Wall Street Gains Momentum in Holiday-Shortened Week

Stocks began the week with a positive shift after overcoming an initial rocky start on Monday, as Wall Street entered a holiday-shortened trading week.

The S&P 500 index rose by 0.7% after starting the day down by 0.5%. The Dow Jones Industrial Average showed resilience, recovering from an early dip to achieve a modest gain of 0.2%. Meanwhile, the tech-heavy Nasdaq composite saw a significant increase, climbing by 1%.

Much of the boost in the market came from advancements in technology and communication stocks that outperformed declines in consumer goods companies and other sectors. Notably, Nvidia, a major player in the semiconductor industry, experienced a 3.7% rise due to its substantial influence on market indices. Similarly, Broadcom surged by 5.5%, contributing positively to the overall market performance.

On the downside, retail giant Walmart fell by 2%, while PepsiCo declined by 1%.

In a notable development, Japanese automakers Honda and Nissan announced discussions regarding a potential merger that could also involve Mitsubishi Motors. Following this news, shares of Honda surged by 12.7%, while Nissan's stock remained unchanged.

On the health front, Eli Lilly saw its shares rise by 3.7% after gaining regulatory approval for Zepbound, a new prescription medicine for adults suffering from sleep apnea.

Conversely, department store chain Nordstrom experienced a drop of 1.5% after revealing it would be taken private by family members and a Mexican retail group in a deal valued at $6.25 billion.

Overall, the S&P 500 climbed by 43.22 points, closing at 5,974.07. The Dow gained 66.69 points for a closing total of 42,906.95, while the Nasdaq rose by 192.29 points, reaching 19,764.89.

Traders were also looking at new data on consumer confidence, which showed a decline in December. The Conference Board reported that the consumer confidence index fell to 104.7 from 112.8 in November, falling short of Wall Street's expectations of 113.8.

This unexpectedly weak confidence figure follows several positive economic reports from the previous week, highlighting a 3.1% annualized growth rate in the economy for the summer, which was better than anticipated. Additionally, reports indicated that the job market remains robust, as seen in the latest unemployment benefit applications.

A recent report also indicated that a key inflation measure, favored by the Federal Reserve, registered a slightly lower rate than economists had predicted. Persistent inflation concerns have created anxiety on Wall Street and for the Fed.

The Federal Reserve delivered its third cut to interest rates this year, though inflation has remained above the target of 2%. Concerns about potential inflation increases have led to speculation that the central bank may adopt a more cautious approach to interest rate cuts in the coming year.

Despite inflation worries, sentiment for further interest rate cuts had helped propel the S&P 500 to approximately a 25% increase in 2024, contributing to 57 all-time highs recorded this year.

Looking ahead, questions remain about the labor market's trajectory and anticipated shifts in economic policies under a new administration starting in 2025. "Much of the strong market performance prior to last week was driven by expectations that a best-case scenario was the base case for 2025," commented Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.

In the bond market, Treasury yields rose, with the yield on the 10-year Treasury increasing to 4.59% from 4.53% at the end of the prior week.

Meanwhile, European markets mostly closed lower, while markets in Asia registered gains.

The week ahead for Wall Street includes several anticipated economic reports. On Tuesday, the U.S. is set to release its November report on newly constructed home sales. Additionally, an update on unemployment benefits is expected Thursday.

U.S. markets will observe an early closure at 1 p.m. Eastern on Tuesday for Christmas Eve and remain closed on Wednesday for Christmas Day.

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