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Stocks opened lower Monday as investors took profits following another red-hot year. Today’s decline puts the Santa Claus Rally at risk – which could signal a tougher start to the new year.
At the close, the blue-chip Dow Jones Industrial Average was down 0.5% at 48,461 and the tech-heavy Nasdaq Composite was 0.5% lower at 23,474. The broader S&P 500 shed 0.4% to finish at 6,905.
With today’s loss, the S&P 500 is now down 0.06% since the December 23 close – the official start of this year’s Santa Claus Rally.
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According to LPL Chief Financial Strategist Adam Turnquist, negative returns during the seven-day period that encompasses the Santa Claus Rally – the last five trading days of the year and the first two of the new year – have corresponded with an average January loss of -0.1% and an annual return of 6.1% since 1950.
Meanwhile, positive returns during this seasonal time frame have resulted in an average January gain of 1.4% and a higher full-year return of 10.4%.
Since 1950, the S&P 500 has averaged a gain of 1.3% during this seasonal period.
Tech sector drags in final stretch of 2025
Nvidia (NVDA, -1.2%) and Tesla (TSLA, -3.3%), which failed to make the list of this year’s hottest S&P 500 stocks, led the losses for the mega-cap names, while Amazon.com (AMZN, -0.2%), Meta Platforms (META, -0.7%) and Microsoft (MSFT, -0.1%) all closed lower.
Apple (AAPL, +0.1%) and Alphabet (GOOGL, +0.02%) bucked the trend to finish in positive territory.
“Any day that … the Magnificent 7 are in the red tends to be a down day,” notes Louis Navellier of Navellier & Associates.
Still, the tech sector remains on pace to finish 2025 with impressive gains, up more than 25% for the year to date. “The profit-taking is clearly seen” in today’s price action, says Navellier.
Caterpillar has room to run
And while the blue chip stock slipped 0.7% today, plenty of analysts think there’s more room to run in the new year.
“Caterpillar is a global market share leader in each of its major product lines: unique in breadth of offering, dealer network, and field population,” writes Truist Securities analyst Jamie Cook in a recent note, adding that the company’s products “are best-in-class and known for quality, durability, and performance.”
Cook has a Buy rating and $729 price target on CAT – representing implied upside of 26% to current levels – saying Caterpillar remains “an underappreciated play on data centers and power generation.”
What’s more, CAT is a top stock pick for income investors, with Cook expecting the company to generate “robust cash flow” in the range of $7.5 billion to $15 billion. And Caterpillar will likely return the majority to shareholders through share repurchases and dividends, she adds.
