Stocks delivered on the final day of the Santa Claus rally as all three main indexes and all 11 sectors closed in the green. While Tesla bounced back and other big tech names put up solid numbers as well, it was another beleaguered electric vehicle maker that led equities higher.
Investors celebrated the end of a holiday-shortened week by bidding up shares on light volume, though the official Santa Claus rally period ended with the S&P 500 down 0.5%.
"Stocks swooned yesterday afternoon for no clear reason. We may see above-average volatility leading up to the new administration taking over," observes Louis Navellier, chairman and chief investment officer at Navellier. "There is a growing concern regarding the plethora of changes being proposed by the incoming Trump 2.0 administration.
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"Stocks, thankfully, trade on earnings prospects, and those remain solid," Navellier concludes. "The tech giants steering the market generate massive cash flows and are affected little by interest rate levels."
Navellier cites consumer strength supported by rising investment portfolio and home price values as well as historically low unemployment and the potential for AI-driven productivity gains. "Also helpful is that the US is doing so much better than the rest of the world that investment funds flows should continue to pour in and support the current high valuations," he adds.
According to Navellier, "the year really begins next Monday, the first full week of trading," with big banks from the financial sector leading off the next round of earnings starting on January 15. "It's too soon to draw any conclusions about 2025 on this last day of the Santa Claus rally."
Closing out a light week on the economic calendar, the Institute for Supply Management said its Manufacturing Index rose to 49.3% in December from 48.4% in November. As the ISM notes in a parenthetical explanation in its press release, a Manufacturing PMI above 42.5% "over a period of time, generally indicates an expansion of the overall economy."
An improved manufacturing index "suggests better days ahead for the struggling sector – if it can only hurdle challenges from a strong dollar, potential tariffs and a looming ports strike," said BMO Capital Markets Senior Economist Sal Guatieri. Noting that December's print represents a nine-month high, Guatieri added that "the sector may still be contracting, but at a minimal rate amid improved demand."
At the closing bell on Friday, the blue chip Dow Jones Industrial Average was up 0.8% to 42,732, the broader S&P 500 added 1.3% to 5,942 and the tech-heavy Nasdaq Composite rose 1.8% to 19,621.
Rivian accelerates EV deliveries
Rivian Automotive (RIVN) stock surged 24.4% after management reported fourth-quarter electric vehicle deliveries of 14,183, beating a consensus forecast of 13,000. The California-based EV maker's announcement came a day after Tesla (TSLA) reported its first-ever year-over-year decline in electric vehicle sales and tumbled 6%. TSLA stock stopped a skid it entered in mid-December with a gain of 8.2%.
Rivian said it produced 49,476 and delivered 51,579 EVs for the full year, in line with management’s production guidance of 47,000 to 49,000 and delivery guidance of 50,500 to 52,000. Management noted that a shortage of a key component "is no longer a constraint on Rivian's production."
RIVN was down 43.3% in 2024 on slowing EV sales and production constraints, with its sell-off accelerating after President-elect Donald Trump said he would consider eliminating the EV tax credit for purchasers. In late November, Rivian did receive a conditional commitment from the Department of Energy's Advanced Technology Vehicle Manufacturing Loan Program for a loan of up to $6.6 billion.
So, is Rivian stock a buy at these levels? Of the 28 Wall Street analysts who cover the consumer discretionary stock surveyed by S&P Global Market Intelligence, 13 rate the stock at Buy or Outperform and 14 rate it at Hold. One analyst says it's a Sell.
Guggenheim analyst Ronald Jewsikow, who rates RIVN a Buy with a 12-month price target of $18, said Rivian's production was "above our 12,000 estimate and the 11,400 consensus and should modestly support gross margins." CFRA Research analyst Garrett Nelson, meanwhile, raised his 12-month price target to $8 from $5 but reiterated his Sell rating on RIVN.
Noting the volumes beat, Nelson writes that "based on RIVN's actual volumes, we are skeptical the company achieved the positive gross margin for the quarter that management had guided for." Nelson notes too that "RIVN's cash burn rates remain very concerning." Rivian will take its turn on the earnings calendar to report complete fourth-quarter and full-year 2024 financial results on February 20.
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