Santa Claus Rally Under Scrutiny: Stocks, Yields, and Lawsuit Drama

The article examines the performance of U.S. stock markets, focusing on the Santa Claus rally phenomenon. It discusses the impact of 10-year Treasury yields, megacap stock valuations, and a notable lawsuit against the Federal Reserve over its annual stress tests. Cryptocurrency stocks struggle amid Bitcoin's decline.

U.S. stock markets braced for a slightly lower start on Thursday, impacted by thin trading volumes following the Christmas break. Investors are closely monitoring portfolios, hoping for a year-end boost from the traditional Santa Claus rally. Key megacap stocks have seen declines, including Nvidia and Alphabet, before markets open.

Yields on government bonds have risen, with the crucial 10-year benchmark at 4.6312%, which suggests potential market weakness. George Cipolloni of Penn Mutual Asset Management notes this inflection point as a factor affecting equities. U.S. stock index futures pointed to declines with Dow, S&P 500, and Nasdaq E-minis all down.

The S&P 500 and Nasdaq have recently experienced gains, driven by major growth stocks. However, concerns over high valuations and fewer anticipated Fed rate cuts taint the outlook. Meanwhile, a lawsuit from major banks challenges the Federal Reserve's annual stress tests, adding another layer of uncertainty for Wall Street.

(With inputs from agencies.)