For the first time in 12 years! S&P 500 closes at a record high on Christmas Eve, warming up the year-end "Santa Claus rally."

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On the lightly traded Christmas Eve trading day, major US stock indices closed at historic highs, with the S&P 500 closing at a new high on Christmas Eve for the first time since 2013.

On December 24th, US stocks closed early due to the holiday. At the close, the S&P 500 rose 0.3% to close at 6932.05 points; the Dow Jones Industrial Average performed even better, rising 0.6% to close at 48,731.16 points, also setting a new closing high. The tech-heavy Nasdaq Composite Index edged up 0.2%. Meanwhile, the CBOE Volatility Index (VIX), which measures market fear, closed below 14 for the first time since December 2025, indicating overall low volatility in the market.

From a technical perspective, this rally is significant. According to Fairlead Strategies analyst Katie Stockton, the S&P 500 had risen previously but had not confirmed a breakout. Wednesday’s closing price was well above the key resistance level of 6911, which from a technical analyst’s point of view is a clear “breakout” signal. The confirmation of this signal may alleviate concerns about a pullback before the end of the year.

Technical Breakout May Pave the Way for Year-End Rally

Although Wednesday’s gains were not large, their technical significance may outweigh the magnitude of the rise itself. According to Fairlead Strategies’ Katie Stockton, before this breakout, technical investors still saw adjustment risks and believed risk management was needed before year-end.

Now, with the S&P 500 closing firmly above the key 6911 level, a technical breakout has formed.

Analysis suggests that this progress may attract more capital that depends on technical signals, especially trend followers and momentum traders, who may see this as a signal to continue increasing positions, thereby providing fresh momentum for the “Santa Claus rally” at year-end. Psychologically, this also eases concerns about a sell-off towards the end of 2025.

Is the "Santa Claus Rally" Underway? Wall Street Unanimously Optimistic for 2026

As the year draws to a close, investors are hoping for the traditional “Santa Claus rally”—typically referring to the last five trading days of the year and the first two of the new year. Although the previous tariff storm caused market volatility, as US stocks hit new highs, this panic has been replaced by the “fear of missing out” (FOMO).

Macroeconomic fundamentals support this optimism. The latest US initial jobless claims have declined, highlighting seasonal volatility in the data but also indicating that the labor market has not deteriorated and layoffs remain low. Traders currently expect two 25-basis-point Federal Reserve rate cuts next year (2026), which is one more than the median forecast from Fed officials.

Principal Asset Management analyst Magdalena Ocampo noted: “As long as the unemployment rate does not spiral upwards, a resilient economy, cooling inflation, and a more accommodative policy environment will continue to support risk assets.”

According to CFRA data, the S&P 500 has risen nearly 18% this year and is on track for a third consecutive year of double-digit gains (“triple crown”). For the upcoming 2026, Wall Street strategists’ forecasts are unusually concentrated and optimistic, with the year-end target price range being the narrowest in nearly a decade, suggesting strong market consensus.

According to Barron’s, since the US presidential election on November 2024, the US stock market has risen 19.8%. Although this is the smallest post-election gain for the same period since 2008, it is still significantly higher than the historical average. Data shows that since 1952, the average gain for this period has been 10.1%, and the current performance is nearly double that.

Despite lingering concerns over tech stock overvaluation, analysis points out that the “Magnificent Seven” stocks have not moved in complete unison, with some underperforming the broader market this year. This means not all tech stocks are in a bubble, and improved market breadth may provide a stronger foundation for continued gains.

“The consensus among Wall Street investment strategists is that this momentum will continue,” the well-known Wall Street bull Ed Yardenisaid, predicting US indices will reach 7,700 points.

Market Sentiment Cautious, Investors Favor Quality and Dividend Stocks

Although the main indices reached new highs, internal market flows reveal the cautious side of investors. On the day, both the small-cap Russell 2000 Index and the tech-heavy Nasdaq underperformed the Dow and S&P 500.

More granular market data shows that high-risk assets performed only modestly. For example, the Invesco S&P 500 High Beta ETF, tracking the most volatile stocks in the S&P 500, rose just 0.2%. Meanwhile, investors showed a clear preference for “quality” and “dividend” stocks: the Invesco S&P 500 Quality ETF and State Street SPDR Portfolio S&P 500 High Dividend ETF both rose 0.5%.

Analysis suggests this may be related to light Christmas Eve trading volume, and traders’ reluctance to take on too much risk before a long weekend. This shows that even in a risk-averse market environment, stocks can still go higher.

Risk Warning and DisclaimerThe market involves risk and investments require caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their particular circumstances. Investing accordingly is at one’s own risk. ```