Santa Claus Rally Begins Today: Stocks to Watch

The market’s recent momentum continued heading into the Christmas holiday as the S&P 500 clinched a new all-time closing high.

We’ve certainly seen a rotation lately into rate-sensitive areas like small-caps after the Fed cut interest rates in December for the third time this year. But large-caps are attempting to retake the lead, in line with what we’ve seen throughout this phenomenal multi-year bull run off the October 2022 lows.

In any case, the calendar is on the side of the bulls as we remain in the most favorable 3-month stretch of the year that spans November through January. And from a seasonal perspective, the next week of trading tends to lean quite bullish.

The Santa Claus Rally

“If Santa should fail to call, bears may come to Broad and Wall.” – Yale Hirsch

We saw a relatively sluggish start to the Christmas-themed month, with the S&P 500 falling nearly 2% through December 17^th. But the index has come roaring back over the past week and is now up roughly 1% as of Christmas Eve.

The days surrounding the Christmas holiday have historically been some of the most bullish times of the year. Dating back to 1988, the second day before Christmas (which fell on Tuesday this year) is the most bullish, with the S&P 500 rising more than 70% of the time over the past 37 years. That trend played out again yesterday.

It looks like the early December weakness is setting up well for a year-end rally. Today marks the final trading day before Christmas and is also the first day of a period known as the Santa Claus Rally.

First discovered by Yale Hirsch (creator of the Stock Trader’s Almanac), the Santa Claus Rally (SCR) is a seven-day period that consists of the final five trading days of the year, along with the first two trading days of the New Year. As markets are closed on Thursday for the Christmas holiday (as well as January 1^st for New Year’s Day), today marks the first day of the SCR.

Since 1950, these 7 glorious days tend to be overwhelmingly green, as the S&P 500 posts an average gain of 1.3% and is positive nearly 80% of the time. In fact, no other 7 days of the year are more likely to finish higher!

If these 7 days are higher, it typically bodes well for the full year. In fact, since 1950, when we have a positive return during this stretch, the S&P 500 gains an average of more than 10% the following year and is higher over 70% of the time.

Years where markets saw negative returns during the Santa Claus Rally period tended to precede bear markets or times when stocks could be bought at lower prices later in the year. For example, a negative SCR preceded relatively flat years like 1994, 2005 and 2015, as well as some of the worst years on record like 2008.

And while we did see a negative return during the SCR period last year (and still registered solid gains in 2025), the early tariff tantrum provided investors the opportunity to purchase stocks on sale.

Stocks to Watch                                                                                            

Chip giant Intel INTC saw its stock fall roughly 2% in early trading on Wednesday, after a report suggested that Nvidia had halted a test to use Intel’s production process to make advanced chips.

Nvidia had been in the testing phase of the so-called “18A” production process, which represented a potential return to manufacturing premium offerings in-house. While Intel touted the technology as a serious breakthrough, the halt raises concerns regarding the practicality of Intel’s advanced manufacturing process.  

The negative headline came just months after the two semiconductor companies announced a key collaboration back in September. Under the prior arrangement, Intel agreed to develop custom x86 CPUs for Nvidia’s AI infrastructure platforms. In return, Nvidia NVDA pledged to invest $5 billion in Intel’s common stock, which sent shares notably higher over the past few months. Intel is currently a Zacks Rank #3 (Hold) while Nvidia remains a Zacks Rank #2 (Buy).

Meanwhile, gold prices back off slightly from their staggering ascent to all-time highs. Gold producer Agnico Eagle Mines AEM is a leader in the space and has soared more than 130% year-to-date. The company engages in the exploration and production of precious metals including gold, silver, zinc, and copper. AEM stock remains a Zacks Rank #1 (Strong Buy) due to favorable earnings estimate revisions.

Conclusion

Remember, markets will close early on Christmas Eve and are closed tomorrow for the holiday.

Today marks the first day of the Santa Claus Rally. As we saw, this seven-day stretch is typically positive and has shown predictive power.

Positive seasonality represents a major tailwind for stocks. Make sure to keep an eye on how markets perform over the SCR period. From all of us here at Zacks, we wish you happy holidays and a prosperous New Year.

Disclosure: Nvidia is a current holding in the Zacks Headline Trader portfolio. Agnico Eagle Mines is a current holding in the Zacks Income Investor portfolio.

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This article originally published on Zacks Investment Research (zacks.com).

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