Stocks Closed Higher On Tuesday, On Pace To Close Out Another Stellar Year Stocks closed solidly higher on Tuesday, the day before Christmas. Even with the shortened hours, the Nasdaq jumped 1.35%, followed by the S&P with 1.10%, and the small-cap Russell 2000 with 1.00%. The half-day on Tuesday only had one economic report – the Richmond Fed Manufacturing Index. It showed improvement at -10.0 vs. last month's -14.0, although it missed the consensus for -8.0. Today we'll get Weekly Jobless Claims, the EIA Petroleum Status Report, and the Survey of Business Uncertainty. The market has largely shrugged off last week's FOMC announcement when the Fed slashed the amount of interest rate cuts expected for next year from 4 (presumably 25 basis points each) to 2. While nobody should have been overly surprised at the move, given the stalled progress on inflation in the previous few reports, it was a bit of a surprise to hear the Fed finally come out and say it. But as I wrote last week, the selloff seemed a bit extreme, and I believe had more to do with profit taking following the spectacular rally the market had seen over the previous few weeks with many believing it ran too far too fast. And since bull markets regularly pull back, that's likely what we saw. The selloff also looked suspect given how pleased Fed Chair Jerome Powell seemed with the economy, which has allowed the Fed to cut rates by 100 basis points already. He marveled that "the U.S. economy has just been remarkable," and that he feels "very good about where the economy is." Hardly an excuse to selloff. Without the market's current obsession with interest rate cuts, good news like this would be cheered. Because the economic outlook is decidedly positive. And that's the takeaway. That was evident in last week's third and final estimate for Q3'24 GDP, which came in at 3.1% vs. last month's estimate of 2.8% and views for the same. That can also be seen in the S&P 500's quarterly earnings estimates for next year with Q1'25 expected to be up 10.0%, Q2'25 up 12.5%, and Q3'25 up 11.3%. 2024 only saw 1 quarter of double-digit EPS growth rates, and already it looks like we'll get 3 quarters (or more) of that next year. As for inflation, the markets appeared to breathe a sigh of relief after last Friday's Personal Consumption Expenditures (PCE) index, (the Fed's preferred inflation gauge), which showed inflation coming in slightly better than expected. In two weeks on Friday, January 10, we'll get the always important Employment Situation report. That'll be the first big economic report of 2025. With the Fed's dual mandate of price stability (low inflation) and maximum employment, the jobs report is an important piece in helping to shape the Fed's monetary policy. And while one report is unlikely to change the Fed's outlook on things, the Fed insists it will remain data dependent. And each report has a cumulative effect, which means every report counts. In the meantime, with just 4 trading days left until 2024 is over, YTD, the Dow is up 14.9%; the S&P 500 is up 26.6%; the Nasdaq is up 33.4%; the small-cap Russell 2000 is up 11.5%; and the mid-cap S&P 400 is up 13.5%. It's been a spectacular year so far. And it looks like we could finish the year on an even stronger note. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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