Stocks Soar in Bargain-Hunting Rally
3:36 pm Thursday, December 29th, 2022
Today’s trade was decidedly positive as some of the most beaten-up stocks enjoy some of the biggest gains. The main indices all headed higher right out of the gate, led by mega cap stocks that have sold off this month in particular on valuation concerns and presumably tax-loss selling activity by participants who bought into the seemingly invincible stocks last year.
Tesla (TSLA), down 42% for the month entering today, leads the outperforming mega caps and has helped drive a 2.6% gain in the Vanguard Mega Cap Growth ETF (MGK). CEO Elon Musk told workers that they shouldn’t be “bothered by stock market craziness,” according to CNBC, and ARK Innovation ETF purchased another 17K shares of Tesla.
Mega cap leadership is reflected by S&P 500 sector performance. The heavily weighted communication services (+2.7%), information technology (+2.7%), and consumer discretionary (+2.3%) sectors sit atop the leaderboard as the only sectors moving more than 2.0%. Meanwhile, the energy sector (+0.6%) shows the slimmest gain today as oil prices continue to lose ground.
Semiconductor stocks are another distinct pocket of strength in the market today. The PHLX Semiconductor Index is up 3.3% with every component trading up. Taiwan Semiconductor Manufacturing Co. (TSM) is a winning standout for the group after holding a 3nm volume production and capacity expansion ceremony, marking a key milestone for advanced manufacturing.
The advance-decline line skews decidedly positive due to broad buying interest, albeit amid thinner trading conditions. Advancers lead decliners by a 6-to-1 margin at the NYSE and a greater than 4-to-1 margin at the Nasdaq.
The S&P 500, despite today’s big move, is still finding it challenging to break out above the 3,850 level, which has been the case since mid-December. The upshot is that Santa Claus is back in town with today’s move after a disappointing December thus far.
The Santa Claus rally period encompasses the last five trading days of the year and the first two trading sessions of the new year, and it is believed to be a good sign for how the new year will start when it produces a cumulative gain over that stretch. To be clear, 2022 was a definite exception to that belief. Recall that the 2021 Santa Claus rally produced a net gain of 1.4% for the S&P 500 and yet the S&P 500 declined 5.3% this January and 5.0% in the first quarter. In any case, the 2022 Santa Claus rally period started with the S&P 500 at 3,822.39 and it currently sits just above 3,850.
The Treasury market trades in mixed fashion. The 2-yr note yield is up one basis point to 4.36% and the 10-yr note yield is down five basis points to 3.83%.
