US stocks rally to shake off new year jitters amid light trading

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Stocks on Wall Street rallied on Friday to close out the first week of 2025 on an upbeat note amid fresh signs of manufacturing stability, bringing a halt to several days of losses.

The S&P 500 closed the day 1.3 per cent higher, posting its biggest rise since November 6 — the day after Donald Trump’s US election victory. The benchmark index’s gains on Friday also brought an end to five consecutive days of losses — the longest such streak since April.

The technology-heavy Nasdaq Composite added 1.8 per cent, helped by a rise of more than 8 per cent for electric-vehicle maker Tesla, whose shares had slipped a day earlier after announcing its first decline in annual vehicle deliveries in more than a decade. Semiconductor giant Nvidia advanced more than 4 per cent.

The gains came at the end of a week shortened by New Year’s Day, which can bring thinner trading volumes. Analysts noted some investors were simply preparing for the “real” start to 2025 on Monday.

But the day’s share price moves also came as a fresh reading on US manufacturing activity topped consensus forecasts, bolstering investor sentiment, and as Trump ally Mike Johnson was re-elected as Speaker of the US House of Representatives.

“It’s really a combination — I’ll call it a potpourri of different factors,” said Kristina Hooper, chief global markets strategist at Invesco. “First of all, we have seen some selling — and so at a certain point, I think investors recognise that there are buying opportunities created when you have multiple days of sell-offs.”

At the same time, Hooper added: “We got some good news today in terms of manufacturing [figures] and I think that certainly set a positive tone. We had a relatively smooth election in the House that also helped contribute to more positive sentiment.”

The ISM manufacturing purchasing managers’ index reading on Friday landed at 49.3 for December — below the threshold of 50 that marks expansion, but above economists’ forecasts and higher than a reading of 48.4 for November.

“The S&P 500 saw a broad rally as [investors] took comfort from the orderly re-election of the US House Speaker, as that helps reduce political uncertainty,” said Dec Mullarkey, managing director at SLC Management.

Referring to the group of Big Tech names that have come to dominate the US stock market, he added “the Magnificent Seven, in particular, remain resilient even as valuations run high. Investors are still confident that the large outlays for [artificial intelligence] investment will pay dividends and secure a first-mover advantage.”

Even after Friday’s sharp rise, the S&P and Nasdaq still posted small weekly losses.

Invesco’s Hooper believed that “the overall environment is supportive of risk assets”, meaning “we’re likely to have more positive days than negative days” as the new year progresses. However, “there could very well be more volatility”, she said.

“Let’s face it: there’s more uncertainty, and as we get closer and closer to January 20 [the day of Trump’s inauguration] I think there will be more question marks around what’s likely to come from the new administration.”

Additional reporting by Will Schmitt