Indices Overview
As of December 20, 2024, major indices have experienced declines compared to their December 13, 2024, closing values:
S&P 500 Index (SPX): Closed at 5,930.85, a decrease of approximately 1.98%.
Dow Jones Industrial Average (DOW): Closed at 42,840.30, down about 2.25%.
NASDAQ Composite: Ended at 21,289.15, declining roughly 2.25%.
Philadelphia Semiconductor Index (SOX): Finished at 4,964.91, a drop of around 3.59%.
Russell 2000 Index: Closed at 42,840.30; this matches the DOW’s value, indicating a potential data discrepancy.
VIX: Rose to 18.36, an increase of approximately 32.9%, signaling heightened market volatility.
1. Geopolitical Environment
United States: The U.S. Congress successfully passed a revised funding bill, narrowly avoiding a government shutdown. The bill ensures federal funding through March 2025 and includes $110 billion in disaster aid and financial relief for farmers. This development has eased concerns about disruptions to government operations and may positively influence market sentiment in the short term.
Russia-Ukraine Conflict:
Ukrainian Drone Strikes: Ukraine targeted the city of Kazan in Russia's Tatarstan region, damaging residential and industrial areas. This marks an expansion of Ukraine's offensive operations.
Russian Retaliation: Russia launched drone attacks on Ukraine, with Ukrainian defenses intercepting many of them. Additionally, Russian forces made advances in eastern Ukraine, capturing a village in Donetsk province.
Leadership Statements: Ukrainian President Zelenskyy emphasized continued strikes on Russian military infrastructure while condemning Russian attacks on Ukrainian civilians.
These developments reflect heightened geopolitical tensions, increasing risks to regional stability and global markets.
2. Central Bank Policies
Federal Reserve (FOMC): On December 18, the Fed cut interest rates by 0.25 percentage points to a target range of 4.25%-4.50%. The decision was accompanied by a hawkish outlook, suggesting that policy rates may remain elevated throughout the upcoming year, delaying any potential easing until mid-2025 or later.
Bank of Japan (BOJ): The BOJ maintained its short-term interest rate at 0.25% with an 8-1 vote. Governor Kazuo Ueda emphasized the need for more data on wage trends and the potential impact of U.S. economic policies before making further adjustments. This cautious approach suggests that any rate hikes may be deferred until early 2025.
3. Corporate Earnings
FedEx Corporation: Reported positive restructuring progress, leading to a rise in share prices.
Nike Inc.: Investors awaited earnings reports, with particular focus on consumer demand and inventory management trends.
4. Seasonality
Year-End Trends: The usual "Santa Claus rally" has been subdued this year due to heightened market volatility and geopolitical tensions, which dampened year-end optimism.
5. Volatility
Current State: The VIX rose to 18.36, indicating increased market anxiety and higher volatility.
Outlook: Given recent geopolitical developments and central bank decisions, our models suggest that the VIX may remain elevated, ranging between 17 and 19 over the next week, reflecting sustained market uncertainty.
Disclaimer
This report is provided for informational purposes only and does not constitute financial, investment, or trading advice. Market conditions can change rapidly, and this report reflects publicly available data as of December 20, 2024. For personalized advice, consult a licensed financial advisor. Neither the authors nor distributors accept liability for any losses incurred directly or indirectly from reliance on this information.
Comments