The Santa rally is a much-anticipated phenomenon on Wall Street. But this year, the rally faces challenges despite cooler inflation data. Will this be enough to sustain optimism in the market?
Wall Street saw some relief last week as inflation data came in cooler than expected. The Fed's preferred inflation measure, the core personal consumption expenditures (PCE) index, rose just 0.1% month-over-month in November. This sparked hope among investors, easing pressure from the Federal Reserve’s hawkish stance.
Fed officials remain divided on future policy. San Francisco Fed President Daly expressed confidence in potential rate cuts by 2025. In contrast, Cleveland Fed President Hammack highlighted the need for more evidence before further easing. This division leaves investors uncertain about the long-term outlook.
Adding to market uncertainty, the US Senate passed a bill to avoid a government shutdown. However, unresolved issues, such as the debt ceiling, loom over future fiscal policies. While this provides temporary stability, the debt ceiling debate may disrupt markets in the coming months.
The Nasdaq 100 ended the week with a bearish engulfing candle, signaling potential short-term pullbacks. Key support levels at 21,000 and 20,315 will be crucial this week. Similarly, the S&P 500 closed below its short-term support but held above mid-November lows. Analysts warn of further declines if critical support levels fail.
The Santa rally remains at risk, influenced by mixed Fed signals, fiscal uncertainties, and technical challenges. Cooler inflation offers hope, but investors should remain cautious as the market navigates these hurdles.
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Will the Santa rally hold? Cooler inflation data offers hope, but market uncertainty remains. Explore Wall Street’s reaction
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