U.S. Stock Outlook | Is the Christmas Rally Still Worth Looking Forward To? Wells Fargo: After the Optimistic Rise, U.S. Stocks May Face a 7% Correction Risk

1. As of December 27 (Friday) before the market opens, the three major U.S. stock index futures are all down. As of the time of writing, Dow futures are down 0.25%, S&P 500 futures are down 0.30%, and Nasdaq futures are down 0.33%.

1. As of the time of writing, the German DAX index is up 0.36%, the UK FTSE 100 index is up 0.02%, the French CAC40 index is up 0.59%, and the Euro Stoxx 50 index is up 0.55%.

1. As of the time of writing, WTI crude oil is up 0.86%, priced at $70.22 per barrel. Brent crude oil is up 0.74%, priced at $73.39 per barrel.

Market News

Wells Fargo: The disconnect between U.S. stocks and economic data is intensifying, and there may be a "hangover" risk in the short term. For the U.S. stock market, 2024 is expected to be a great year. However, according to Wells Fargo, the optimistic rally after the election may lead to a "hangover" for U.S. stocks in the short term, with the S&P 500 index potentially dropping by 7%. The bank noted in a report on Monday that the disconnect between the stock market and the economy is intensifying, with U.S. stock indices rising after the presidential election while U.S. economic data remains lukewarm. The Bloomberg U.S. Economic Surprise Index hovers slightly above zero, tracking the relationship between economic data releases and market expectations. This indicates that despite optimistic sentiment driving the market higher, there have been almost no surprises in economic data in recent months.

As the U.S. stock market wraps up a bountiful year, is the "Santa Claus rally" still worth expecting? For the U.S. stock market, 2024 is expected to be a great year. However, according to Wells Fargo, the optimistic rally after the election may lead to a "hangover" for U.S. stocks in the short term, with the S&P 500 index potentially dropping by 7%. The bank noted in a report on Monday that the disconnect between the stock market and the economy is intensifying, with U.S. stock indices rising after the presidential election while U.S. economic data remains lukewarm. The Bloomberg U.S. Economic Surprise Index hovers slightly above zero, tracking the relationship between economic data releases and market expectations. This indicates that despite optimistic sentiment driving the market higher, there have been almost no surprises in economic data in recent months.

Former Chair of the Council of Economic Advisers: The Fed's rate cut in December is puzzling but thought-provoking. Former Chair of the U.S. National Economic Council Jason Furman recently stated that the Federal Reserve's decision to cut rates in December is puzzling but also thought-provoking Furman pointed out that the traditional argument against rules-based monetary policy is that it requires Federal Reserve officials to pre-set too many contingencies in advance. Furman believes that the Federal Reserve's judgment is also better than that of most critics. After committing a serious error by failing to raise interest rates in a timely manner, which led to inflation exceeding 5%, the Federal Reserve has addressed the issue more aggressively than most of its hawkish critics might have thought. The current economic situation in the United States is not flawless, and a soft landing remains difficult to achieve, but its condition has improved significantly. However, Furman argues that, in terms of the Federal Reserve replacing rules with its judgment, rules appear to be better than judgment.

The Bank of Japan's stance on interest rate hikes is cautious, with the yen hovering near a five-month low. Due to the stark contrast between the Federal Reserve's hawkish remarks and the Bank of Japan's cautious attitude towards further tightening of policies, the yen hovered near a five-month low against the dollar on Friday. As of the time of writing, the USD/JPY exchange rate was 157.62, close to the day's low of 158.09, the lowest level since July 17. The summary of opinions from the Bank of Japan's December policy meeting released on Friday showed that some officials have become more confident about recent interest rate hikes, while others remain cautious about wage trends and the uncertainties of Donald Trump's administration policies. Similarly, the Japanese inflation data for December released on Friday supports further interest rate hikes. Economists believe that Trump's proposed deregulation, tax cuts, increased tariffs, and tightened immigration policies are beneficial for both economic growth and inflation. The USD/JPY is expected to appreciate by 5.4% this month and by 11.9% year-to-date.

A glorious performance comes to an end, Bitcoin's year-end rally fizzles out. In the final days of a record-breaking year for digital assets, Bitcoin's upward momentum is increasingly weakening as investors assess the remaining momentum brought by incoming President Donald Trump's support for the cryptocurrency industry. As of the time of writing, Bitcoin was trading at $95,914, down 0.12% from the previous day. Smaller tokens, including Ether and Dogecoin, are also struggling to gain market attention. Trump is pushing forward a commitment to create a cryptocurrency-friendly environment in the U.S. and supports the idea of establishing a national Bitcoin reserve. Traders are watching to see if such a reserve is feasible.

Individual Stock News

Is Honda Motor (HMC.US) the biggest beneficiary of the merger? Investors choose to sell Nissan Motor. Due to market speculation about the share transfer ratio between Nissan Motor and Honda Motor's planned transaction, Nissan Motor's stock is expected to see its largest decline since the sell-off in August. Nissan Motor's stock plummeted by as much as 15% on Friday, marking the largest intraday drop in 26 years. Since news of a potential collaboration between Nissan Motor and Honda Motor surfaced, the stock has been volatile, surging over 23% on the day the news broke on December 18. Data shows that Nissan Motor's 30-day historical volatility has since soared to its highest level in 16 years, with its 14-day relative strength index reaching 81.6 after recent gains, exceeding the threshold indicating overbought conditions. Nikkei News released an analysis report on Friday morning estimating the share ratio between Honda and Nissan at 5:1 Netflix (NFLX.US) Christmas NFL Live Broadcast Achieves Great Success, Breaking Viewership Records. On Christmas Day, Netflix live-streamed two National Football League (NFL) games, providing users with a smooth streaming experience and receiving high praise from users. Importantly, these two highly anticipated games brought strong viewership to Netflix. According to reports, the two NFL games streamed during Christmas averaged 24.2 million viewers. The game between the Kansas City Chiefs and the Pittsburgh Steelers attracted 24.1 million viewers, while the Baltimore Ravens' victory over the Houston Texans drew 24.3 million viewers. During halftime of the Ravens and Texans game, Beyoncé's performance attracted 27 million viewers, peaking in viewership. Notably, Netflix broke all streaming viewership records for NFL games and also set a viewership record among the important demographic of 18 to 34 years old.

AI Agent Boom Expected in 2025? Tech Giants like Microsoft (MSFT.US) and NVIDIA (NVDA.US) are Getting Involved. Several tech giants have begun to lay out plans in the field of artificial intelligence agents. Companies like NVIDIA, Microsoft, and ServiceNow are increasingly discussing AI agents, claiming that they will change how businesses and consumers view AI technology. If 2024 is the year when AI chatbots become more useful, then 2025 will be the year when AI agents start to take over. AI agents are similar to powerful AI robots that can act on behalf of users, such as extracting data from received emails and importing it into different applications. The development of AI agents aims to reduce those tasks that are often troublesome and time-consuming, such as filing expense reports. In the future, it is expected that not only will there be more AI agents, but also that more large tech giants will invest in developing this technology.

Important Economic Data and Event Forecast

Beijing time 21:30: U.S. November Wholesale Inventories MoM Preliminary (%).

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