Wall Street nixes the Christmas Eve losses

The plunge protection teams must have been working overtime.

Stocks soar 5%, Dow adds a record-breaking 1,086 points

Yahoo,

26 December, 2018

The S&P 500 and the Dow each clocked their biggest single-session point gains on record on Wednesday.

The S&P 500 (^GSPC) rose 4.96%, or 116.6 points, as of market close. On a percentage basis, the index advanced in its best session since March 2009. The Dow (^DJI) surged 4.98%, or 1,086.25 points, posting its best session for the day-after-Christmas ever. The Nasdaq (^IXIC) rose 5.84%, or 361.44 points, and also posted its best percentage advance since March 2009.

Shares of tech giants were some of the biggest gainers during Wednesday’s session. The combined gains of Amazon (AMZN), Microsoft (MSFT), Apple (AAPL), Google (GOOG, GOOGL), Facebook (FB) and Netflix (NFLX) during Wednesday’s session alone totaled $242.7 billion in market capitalization. Retail stocks also got a boost following a report that holiday spending increased the most in six years this season.

The three major indices completely regained losses after a crushing session on Monday, which had been the worst Christmas Eve for stocks on record. At the end of Monday’s session, the S&P 500 was lower by 19.77% from its year-to-date closing high of 2,930.75. The index closed lower by 20% from its intraday high of 2,940.91 from September, reaching the percentage decline from a recent peak many consider to define a bear market.

Stocks are currently trading in the seven-day period that often brings a so-called “Santa Claus rally,” an annual window during which equities tend to rise. The event takes place during the last five trading days of the year through the first two trading days of the new year. The S&P 500 has averaged a 1.7% gain and traded higher about 78% of the time during this period since 1928, analysts from Oppenheimer wrote in a note Wednesday. However, in the event of a failed Santa Claus rally, stocks have historically lost an average of 1.2% over the next three months.

For the seven trading sessions just before this year’s Santa Claus rally period began on December 24, the S&P 500 fell by 8.83%.

Investors are continuing to digest commentary from President Donald Trump, who told reporters at the White House on Tuesday that he thought U.S. companies were having “record kinds of numbers” and that now is a “tremendous opportunity to buy” stocks amid the months long downturn. At current levels, the price-to-earnings ratio of the S&P 500 is just above 13 times estimated earnings for the coming year, giving U.S. equities the most attractive valuations in about five years, according to Bloomberg data.

Trump also said that he has “confidence” that the Federal Reserve will “get it pretty soon” when it comes to interest rates, which the president believes have been rising too quickly. The comments helped to quell concerns over the future of Fed Chairman Jerome Powell, whom Trump has consistently publicly slammed over the Fed’s path of interest rate increases.

On Wednesday, White House economic adviser Kevin Hassett told reporters that Powell’s job is “100%” safe, even amid Trump’s repeated lambasting. Bloomberg reported late last week that Trump had considered ousting Powell over the recent rate hikes, which have contributed in part to market volatility. But Hassett’s public reassurances echo those of Treasury Secretary Steven Mnuchin, who said in Twitter posts earlier this week that Trump “never suggested firing” Powell.

Meanwhile, crude oil prices also surged after U.S. West Texas Intermediate crude oil futures settled at their lowest level since June 2017 on Monday. U.S. crude prices (CL=F) rose 8.7% to settle at $46.22 per barrel. Brent crude prices (BZ=F) rose 7.69% to $54.35 per barrel as of 2:33 p.m. ET.