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What to know this week

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As 2022 draws to a close, this weekend will cap off a brutal year for Wall Street.

US stock and bond markets will be closed for Christmas Day on Monday, December 26th.

Earnings and economic calendars are bright, with much of the business world off until next year.

Traders working during the holidays can get information on wholesale and retail inventories, weekly unemployment claims, and the latest S&P CoreLogic Case-Shiller Home Price Index.

As investors return from a long weekend on Tuesday, hopes are high for the Santa Claus rally, the stock market’s seasonal rally that occurs at the end of December. However, continued selling pressure amid fears of a looming recession could cause the favorable pattern to break this year.

Usually defined as the last five trading days of the year and the first two trading days of the new year, the Santa Claus rally was coined by Yale Hirsch, creator of the Stock Traders Almanac, in 1972.

During this period, the S&P 500 has posted an average gain of 1.3% going back to 1950, according to data from LPL Financial. This compares to an average return of 0.2% for all his seven-day rolling returns.

Santa Claus watches over the 98th annual Christmas tree lighting ceremony at the New York Stock Exchange on December 1, 2021 in New York. (Photo by Brian R. Smith/AFP) (Photo by Brian R. Smith/AFP via Getty Images)

More importantly, the Santa Claus rally is often viewed as an indicator of future market performance. The S&P 500 historically underperformed in January and the following year and didn’t see a year-end rally, he notes, LPL Financial.

Yale Hirsch even predicted that “bears may come to Broad and Wall if Santa Claus does not call”.

Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance, said: “It’s never too late for Santa’s rally, but unfortunately the positive inflation data is a tough call from the Federal Reserve. , overshadowed by the coming recession, which they orchestrated with aggressive rate hikes, said the memo.

2022 is coming to an end, with its worst annual performance since the 2008 global financial crisis. It also marks the end of his three-year streak in the stock market, with a dramatic drop from 2021. The S&P 500 returned close to 27%.

The S&P 500 historically underperforms in January and the following year, when there is no year-end Santa Claus rally.  (Credit: Adam Turnquist, Chief Technical Strategist, LPL Financial)

The S&P 500 historically underperformed in January and the following year without a previous Santa Claus rally. (Credit: Adam Turnquist, Chief Technical Strategist, LPL Financial)

Much of that is due to the historic action of global central banks in concerted interest rate hikes to curb inflation, the highest in decades, after a period of massive fiscal stimulus. The US Federal Reserve (Fed) has hiked interest rates by a cumulative 4.25% this year, the largest since 1980, suggesting further hikes are likely in the year ahead.

After the central bank announced its last price hike of the year last week, the stock market experienced its worst outflow in history, hitting 420, according to figures from Bank of America, Citigroup and Barclays, each citing data from EPFR Global. Recorded capital outflows of nearly $100 million.

Looking ahead, next year may not be much upside for equity investors. Monetary policymakers around the world have vowed to ensure a tighter push for financial conditions next year until price stability is firmly restored. Street celebrities are preparing for a long road to nowhere for US stocks.

Last week, veteran hedge fund manager David Tepper said he was “leaning on the stock market” over concerns that rising interest rates would hurt stocks even more.

In an interview with CNBC’s Squawkbox, the founder and president of Appaloosa Management said, “So many central banks tell me what they’re going to do, so up/down doesn’t make sense at all. I think.

“Sometimes they tell you what they’re going to do, but you have to believe it.”

economic calendar

Monday: There are no notable reports to be released. The market is closed for the Christmas holidays.

Tuesday: wholesale stockm/m, Nov reserves (0.5% m/m); advance goods trade balanceNovember (-$96.8 billion vs. -$99.0 billion last month). retail inventorym/m, Nov (-0.1 forecast, -0.2% m/m); FHFA House Price Indexm/m, Oct (-0.6% expected, 0.1% m/m); S&P CoreLogic Case-Shiller 20-City Compositem/m, Oct (forecast -1.40%, m/m -1.24%); S&P CoreLogic Case-Shiller 20-City Compositey/y, Oct. (forecast 8.20%, previous month 10.43%). S&P CoreLogic Case-Shiller U.S. National Home Price Index, YoY, Oct (10.65% last month). Dallas Fed manufacturing activityDecember (-14.4 m/m)

Wednesday: Richmond Fed Manufacturing IndexDecember (previous month was -9); pending home salem/m, November (forecast -1.0%, previous month -4.6%); pending home sale NSAy/y, Nov (-36.7% m/m)

Thursday: first unemployment insurance applicationthe week ending December 24 (216,000 in the previous week), Continuous billingthe week ending December 17 (1,672,000 the previous week),

Friday: There are no notable reports to be released.

earnings calendar

Monday: There are no notable reports to be released. The market is closed for the Christmas holidays.

Tuesday: There are no notable reports to be released.

Wednesday: Cal-Maine Foods (Calmly)

Thursday: There are no notable reports to be released.

Friday: There are no notable reports to be released.

Alexandra Semenova is a reporter at Yahoo Finance. follow her on her twitter @alexandraandnyc

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