S&P 500 delivers biggest Christmas Eve rally since 1974

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The Santa Claus stock market rally got off to a flying start on Tuesday as stocks posted their strongest performance in five decades on Christmas Eve, driving many investors crazy.

The New York Stock Exchange lit up at Christmas.

AFP via Getty Images

Important facts

The benchmark S&P 500 rose 1.1% in shortened trading, the first session of the Santa Claus rally that has produced historically above-average returns for the S&P, which tracks 500 of America’s largest public companies and is the most commonly cited benchmark in tracking the performance of the stock market .

That’s the best gain on Dec. 24 since 1974, according to FactSet data.

Tuesday’s rally was broad-based, with more than 90% of S&P-listed stocks rising.

Tesla, the automaker led by the world’s richest person, Elon Musk, was the index’s biggest percentage gainer, up 7.4%, while other notable stocks that gained at least 2% included Netflix, Starbucks and Walmart .

tangent

There were no major economic, earnings or news catalysts on Tuesday, reflected in unusually low trading activity, even for a holiday-shortened session (markets closed at 1:00 p.m. EST). In fact, Tuesday was the lowest trading volume day for the S&P since March 2, 2011, according to Yahoo Finance data.

What is the Santa Claus Rally?

The term refers to the phenomenon of above-average stock market returns on the last five trading days of a year and the first two trading days of the following year. Since 1950, the S&P has gained an average of 1.3% over that seven-session period, far exceeding the average gain of 0.3% over a typical seven-day period, according to LPL Financial Research. This year’s Santa Claus rally runs from Tuesday to next Friday.

Surprising fact

It was an unforgettable December for stock market historians. Earlier this month, the Dow Jones Industrial Average experienced its longest losing streak in 50 years, falling 11 times in a row. The Dow, which tracks 30 American companies, has gained more than 2% since breaking its losing streak last week.

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