Assessing the New Year's Day Terror Attack, the Lack of Santa Rally and More
What we know after the deadly incident in New Orleans; also, let's check on the 'January Barometer' and review Tuesday's numbers.
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The new year has gotten off to just an awful start. By now, I am sure all readers know of the terror attack in New Orleans that occurred around 03:15 local time. An honorably discharged U.S. Army veteran from the state of Texas identified by the FBI as Shamsud-Din Bahar Jabbar had rented a pickup truck and drove the vehicle at a high speed into crowds of holiday revelers in the French quarter of that city.
Jabbar, who had once been deployed to Afghanistan and had risen to the rank of Staff Sergeant, then opened fire on responding police officers, wounding two of them. In all, 15 individuals were killed, while at least 30 were wounded as a result of this attack. Jabbar was found to have an ISIS flag, weapons and at least one possible bomb in the rented vehicle.
To make matters worse, obstacles that had been in place along this section of Bourbon Street, where the attack took place, had been removed for repairs to be made ahead of next month's Super Bowl, which was considered a higher risk event. Police vehicles and other barriers had been set up to block access in place of the more permanent obstacles, but Jabbar had been able to simply drive around them.
The ISIS flag and potential explosives, as some have described, have raised speculation that the terrorist group or some kind of sleeper cell loyal to the terror group had played a role in this attack. The New York Times is reporting that according to family members, Jabbar had recently converted to Islam and began behaving somewhat erratically. I have seen unconfirmed reports in social media that while in the Army, Jabbar had been reported by other soldiers on more than one occasion to unit commanders as having held extremist views.
Meanwhile, also on Wednesday morning, a Tesla TSLA Cybertruck rented through the same app as the pickup truck used by Jabbar in New Orleans, exploded and caught fire in front of the Trump International Hotel in Las Vegas. One person died inside the truck while seven others suffered what have been described as minor injuries, though two were hospitalized.
Questions Remain ...
That these two vehicles were rented through the same app raises questions. So does the fact that a Tesla was blown up in front of a Trump building, as Tesla CEO Elon Musk is working for the incoming Trump administration and has been a political ally to the President-Elect. How fluid is the security situation? Are the two events closely connected? Are their co-conspirators out there who not only aided in the planning of these events, but may be planning whatever comes next?
Was the ISIS flag evidence of involvement or an attempt to put authorities on the wrong trail? Surely its presence inside the vehicle was intentional. As a result, college football's Sugar Bowl, which is a playoff game set between Notre Dame and Georgia and scheduled for Wednesday evening was postponed, so authorities could sweep the building and rescheduled for this (Thursday) evening.
Market Impact
While these events are clearly tragic and we pause to pray for the repose of the souls lost, as well as the welfare of those wounded, there is not likely a visible market impact without another event in short order that appears to be potentially connected. Expect increased security at all events where individuals mass for any reason. The Super Bowl would be an obvious event where security, which would be elevated anyway, will be even tighter.
Should, God forbid, there be another such event, then allocations will be impacted, and defense / security focused businesses will see increased sales and increased investment. On that note, as a Tesla vehicle was used in the Las Vegas attack, it may be pertinent to note that Tesla is expected to publish fourth-quarter deliveries as soon as Thursday. Analysts are expecting to see a number that tops the company's record 484,507 units delivered in the fourth quarter of 2023 and goes as high as 506,000. Improved demand in China is expected to have been a driver.
Good News
Despite a rough ending to the year, the S&P 500 popped for a gain of 23.3% in 2024 on top of a 24.2% run for 2023. The two-year gain of 53% is the best two-year move for the index since 1997/1998, when the index screamed a rough 66% higher. Humans still controlled both order flow and the point of sale back in those days, so I am not really all that sure that data compiled before the New York Stock Exchange went electronic in late 2006 is all that comparable to data compiled after robots and high-speed algorithms took over. That said, I move on to my next topic.
Two Years Without Santa?
For the first time since 2015/2016, it looks like there could be a two-year stretch without a Santa Claus rally. The traditional Santa Claus Rally period covers the final five trading sessions of the outgoing year and the first two trading sessions of the upcoming year. With U.S. stocks ending 2024 on a four-day losing streak, that makes things tough for Santa.
The S&P 500 rallied nicely on both Dec. 20 and Dec. 23, the final two days ahead of the period, which had Santa starting in a vulnerable position to begin with. After four days of losses, the index is down 1.6% since the start of the period, despite still being up 0.8% since the low of the day on Dec. 20.
While Santa is under pressure, he can't truly be counted out just yet, as the bulls still have today and tomorrow to pull the proverbial rabbit out of a hat. Now, we look, if we believe in such things, for the "First Five Days" Indicator and the "January Barometer." The indicator is simple to understand. If the S&P 500 closes out the first five days of the new year on the plus side, the entire year according to lore will likely close in the green. How accurate is this indicator? According to Investopedia, since 1950, this five-day period has foretold market direction for the full year about 69% of the time.
The January Barometer covers the entire month, but the idea is the same. Basically, the theory is that as January goes for the S&P 500, so goes the year. Again, according to Investopedia, this little piece of stock market lore has held true about 70% of the time since 1950.
Do I believe in all of this start-of-the-year mumbo jumbo? Not really. Since 1950, by my own count, there have been 21 "down" years for the S&P 500, meaning that the S&P 500 has ended the year in the green 72% of the time. That would mean statistically that both the "First Five Days" indicator and the "January Barometer" are both underperforming the S&P 500 since 1950, but are close enough to make deciphering between causation and correlation nearly impossible.
My plan remains exactly what it has been since I was a young man. That is to show up almost every single day and always try my best to find the right names just a little bit ahead of consensus. So far, that plan and not relying upon possible superstition that may or may not be a part of what makes something seasonal or not has carved out for myself and my dependents a successful career on Wall Street and an ability to cherry pick the right names. Nothing replaces doing the hard work and putting in the hours.
Marketplace
Tuesday wasn't as bad as it felt. The four-day smackdown surely left a mark, but still the major equity indexes have not taken out their Dec. 20 turnaround lows. That means that, technically, we are still in an uptrend, though many of you feel like you have been visited by the Heat Miser and not Santa.
The indexes away from tech were really rather tame on Tuesday. The S&P 500 gave up 0.43% on Tuesday as the Nasdaq Composite gave back 0.9%. Within that sector, the Philadelphia Semiconductor Index gave back 0.93% led lower by Nvidia NVDA, while the Dow Jones US Software Index gave back 0.8% led lower by AppLovin APP. Those two names were down 2.33% and 3.44% respectively. Small to mid-cap indexes closed slightly higher for the session.
Readers may be surprised to learn that six of the 11 S&P sector SPDR exchange-traded funds closed in the green on Tuesday. This broke a two-day streak where all 11 of these funds closed in the red. Energy XLE was the runaway winner on Tuesday at +1.31%, while the growth sectors, Communication Services XLC and Technology XLK took two of the bottom three rungs on the daily performance tables.
Breadth was not awful on Tuesday either. Winners beat losers by a rough 7-to-4 at the NYSE, while losers beat winners by about 7-to-6 at the Nasdaq. Advancing volume took a majority share of composite trade for names listed at both exchanges, as aggregate trade dropped a bit for NYSE-domiciled stocks and increased a bit for Nasdaq-domiciled names. Overall, Tuesday breadth on a less awful "down" day on Tuesday, pointed towards another attempt at an early rally on Thursday. Early rallies that fade have become "a thing" of late. Let's see what happens today.
Economics (All Times Eastern)
07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.75%.
07:00 - MBA Mortgage Applications (Weekly): Last -0.7% w/w.
08:30 - Initial Jobless Claims (Weekly): Expecting 221K, Last 219K.
08:30 - Continuing Claims (Weekly): Last 1.91M.
09:45 - S&P Global Manufacturing PMI (Dec-F): Flashed 48.3.
10:00 - Construction Spending (Nov): Expecting 0.3% m/m, Last 0.4% m/m.
11:00 - Oil Inventories (Weekly): Last -4.24M.
11:00 - Gasoline Stocks (Weekly): Last +1.63M.
The Fed (All Times Eastern)
No public appearances scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
After the Close: RGP (.01)
At the time of publication, Guilfoyle was long NVDA equity.
