By Nicholas Jasinski | Friday, December 20

Sleigh Bells. Traders and investors bought the dip today, sending stocks higher in a broad rally to end the last full trading week of 2024. Santa came a bit early this year, it appears.

The Dow Jones Industrial Average added 1.2%, the S&P 500 rose 1.1%, and the Nasdaq Composite climbed 1.0%. 

Nearly 450 of the stocks in the S&P 500 closed higher, as all 11 sectors gained.

And it was apparently a high-conviction rally. Some 21.7 billion shares changed hands on U.S. exchanges today, the largest volume day in almost four years. For comparison, the average daily trading volume so far this year is 11.6 billion.

It appears not many on Wall Street took off early for the holiday week.

Today began with the latest inflation data, in the form of the personal consumption expenditures price index—which happens to be the Federal Reserves preferred price measure. And the report contained some rare-for-recent-times good news on the inflation front.

The PCE price index was up 0.1% in November and 2.4% from a year earlier. That compared with expectations of a 0.2%, which would have matched the gains in September and October.

There was even more to like from the core PCE index, which excludes food and energy components. That rose by a mere 0.1% in November after rising 0.3% in each of the past two months. But it was still up by 2.8% year over year. The Fed has a 2% annual inflation target.

On Wednesday, the Federal Open Market Committee delivered its third-consecutive interest-rate decrease but forecasted a slower pace of rate cuts ahead. Fed Chair Jerome Powell tied further easing to more progress on reducing inflation.

So while a deceleration in the Fed’s preferred measure in November is a step forward in the central bank’s fight against inflation, it’s far from the end. Fed officials won’t overreact to one month of data, particularly when the 2025 outlook is for more bumpy inflation prints alongside strong economic growth.

Futures-markets were pricing in roughly 10% odds of a rate cut at the FOMC’s next meeting on Jan. 28-29.

Barron's Randall Forsyth makes the case in this weekend's Barron's for why the Fed might find itself unable to cut rates at all next year, and may even be in a position to hike them. Find his latest column here.

In the meantime, investors are heading into a typically low trading volume but winning week for the stock market. Since 1950, the S&P 500 has gained an average of 1.3% over the Christmas and New Year's holidays.

Watch our TV show on Fox Business Saturday and Sunday at 9:30 a.m. and 10:30 a.m. ET. This week, analyst Ivy Zelman examines the housing outlook for 2025. Plus, can stocks extend this year's blistering rally?

DJIA: +1.18% to 42,840.26
S&P 500: +1.09% to 5,930.85
Nasdaq: +1.03% to 19,572.60

The Hot Stock: Enphase Energy +8.6%
The Biggest Loser: Tesla -3.5%

Best Sector: Real Estate +1.8%
Worst Sector: Consumer Discretionary +0.3%

Yesterday's newsletter reversed the day's best and worst sectors. The utilities sector's gain on Thursday was 0.5%, and the real estate sector lost 1.7%.