US stocks ended mixed on Thursday, but still posted their strongest weekly gain since November amid a 9% rally in oil prices.
The Dow Jones Industrial Average declined 0.3% in a holiday-shortened Thursday session. The benchmark gauge closed 2.5% higher for the week.
The S&P 500 Index also fell 0.2%, but ended the week with gains of 2.8%. The S&P 500’s energy component gained 4.6% for the week. Meanwhile, the Nasdaq Composite Index closed up 0.1% on Thursday, extending its weekly gain to 2.6%.
The holiday-shortened week was the best for US stocks since November 20. Investors can expect more of the same between Christmas and New Year’s Day, a period that’s historically known as the Santa Claus Rally for US stocks.
The Christmas rally pushed expectations for short-term volatility to their lowest level in nearly one month. The VIX Volatility Index, also known as the “investor fear gauge,” fell more than 25% in the holiday-shortened week to close well below the historical average.
In commodities, oil prices rallied for a third consecutive day on Thursday. The West Texas Intermediate (WTI) benchmark for US crude maintained its premium over Brent, adding 60 cents or 1.6% to $38.10 a barrel. That was WTI’s highest closing price on the New York Mercantile Exchange since December 4.
International benchmark Brent crude climbed 53 cents or 1.4% to $37.89 a barrel on ICE Futures Europe.
Gold prices also rallied on Christmas Eve, as precious metals tracked the recovery in energy prices and another decline in the US dollar. Gold for February delivery closed up $7.60 or 0.7% at $1,075.90 an ounce.
Silver futures also rallied by 9 cents or 0.7% to $14.38 an ounce.
The US dollar continued its post-FOMC decline on Thursday, falling 0.4% to 97.98. The US currency has given up nearly all of its gains following the Federal Reserve’s historic decision to lift interest rates on December 16. However, the greenback is expected to strengthen significantly next year as the Fed continues to tighten monetary policy. Based on policymakers’ most recent “dot plot” chart, the median forecast for the federal funds rate in 2016 is 1.375%. This implies four 25-basis point increases to the interest rate in the 2016 calendar year.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.