Weekly Recap: A Rocky Year’s Finish

The US stock market experienced a decline in the holiday-shortened week, with the S&P 500 and Nasdaq Composite declining by 1.1% and 1.5% respectively largely due to the performance of the communication services and information technology sectors. However, US Treasury yields have continued to rise, surpassing the 4.6% mark, largely due to healthy economic data, inflation concerns, and the Fed’s efforts to combat rising prices. Analysts predict the 10-year Treasury yield to remain within a range of 4% to 4.5% throughout 2025, with the Fed’s rate cuts preventing a significant surge.


Shifting market leadership

Shifting market leadership is anticipated in 2025, with value-style stocks expected to grow faster and be less vulnerable to global trade uncertainties. Apple’s shares declined on Friday, contributing to a broader sell-off in mega-cap tech stocks. Tesla led the losses with a 5% drop, while Nvidia and other tech giants like Microsoft, Alphabet, Amazon, and Meta also experienced declines. Palantir Technologies, a recent Nasdaq 100 addition, saw a 3.7% drop, and Super Micro Computer continued its volatile trading with a 5.2% decline.

US Dollar Remains Resilient

The US dollar remains resilient, supported by expectations of robust economic growth and potential inflationary pressures under the current administration. The dollar’s resilience is further bolstered by rising doubts regarding the extent of future Fed rate cuts.


Currency Market Observations

Currency market observations show that the Canadian Dollar has hit near 56-month lows against the US Dollar due to a lack of significant economic data and diverging monetary policies between the Bank of Canada and the Fed. The absence of significant data releases next week further dampens market activity and provides little direction for the Canadian Dollar. The Canadian Dollar is expected to remain under pressure in the near term, with USD/CAD likely to drift higher.


EUR/USD experienced minor fluctuations, consolidating within a range between 1.03 and 1.06. The European Central Bank’s continued rate cuts, in contrast to the anticipated slower pace of cuts by the Fed, are expected to continue to pressure the euro. The US dollar continued its ascent against the Japanese yen, with a potential break above the 158 yen level opening the path towards all-time highs.

Gold Prices Performance

Gold prices traded sideways on Friday, exhibiting caution as the year draws to a close. Technical indicators suggest a period of consolidation, with gold hovering above the $2,630 level. A decisive move above the 50 mark could signal increased buying interest and potentially fuel further price appreciation. Gold has gained traction as moderate US inflation data has tempered expectations of aggressive Fed rate cuts and fueled speculation about limited reductions in borrowing costs. Geopolitical risks, including the ongoing conflict in Ukraine and escalating tensions in the Middle East, have bolstered gold’s appeal as a safe-haven asset.

Cryptocurrencies

Bitcoin and Ethereum options contracts are set to expire, marking a historic event in the cryptocurrency market. The unprecedented volume of contracts, including $14.38 billion in Bitcoin options and $3.7 billion in Ethereum options, indicates increased trading activity and trader anticipation. The current market sentiment, as reflected in put-to-call ratios, indicates optimism. Bitcoin’s P/C ratio stands at 0.69, suggesting more traders are placing bullish bets. Ethereum’s P/C ratio has declined to 0.41, indicating a stronger bullish sentiment and higher confidence in ETH’s price appreciation. This record-breaking options expiry event could lead to substantial market volatility.


Crude Oil
Crude oil prices are surging on Friday as the market anticipates key US inventory data releases, including figures from the Energy Information Administration (EIA). While other asset classes are experiencing low volatility, crude oil is poised for potential spikes before the end of the week.
The US Dollar Index, which measures the US Dollar’s strength against other major currencies, is hovering near a two-year high, indicating a strong US Dollar. However, volatility in the Dollar is expected to remain low as the year-end approaches.
The EIA released its weekly Gas Storage Change and Crude Oil stockpile change numbers later on the week, Market expectations pointed to a drawdown in crude oil inventories. The Energy Information Administration (EIA) reported a 4.2-million-barrel decline in US commercial crude oil inventories for the week ending December 20th. This brings the total inventory to 416.8 million barrels, excluding those held in the Strategic Petroleum Reserve. During the same week, crude oil refinery inputs increased by 205,000 barrels per day to an average of 16.8 million barrels per day, with refineries operating at 92.5% capacity. Gasoline production also saw an increase, averaging 9.9 million barrels per day. Meanwhile, crude oil imports decreased by 178,000 barrels per day.

Despite the potential for short-term price increases, analysts believe any sustained rally in crude oil prices is unlikely due to fundamental factors. Key resistance levels are identified near the 100-day Simple Moving Average, while support levels lie near the $67.12 mark.

The Week Ahead

Next week, markets will be closely watching the release of several key economic indicators. On Monday, the Eurozone’s Harmonized Index of Consumer Prices (HICP) is due out. Other anticipated data includes the Chicago Purchasing Managers’ Index for December, US Pending Home Sales, China’s Manufacturing and Non-Manufacturing Purchasing Managers’ Indexes (PMIs) from the National Bureau of Statistics, Caixin Manufacturing PMI, Initial Jobless Claims, and the S&P Global Manufacturing PMI.