US stocks rally to shake off new year jitters in weak trading

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Stocks on Wall Street rallied on Friday, ending the first week of 2025 on a positive note amid new signs of stability in the manufacturing sector, ending several days of losses.

The S&P 500 closed the day up 1.3 percent, posting its biggest gain since November 6 – the day after Donald TrumpThe US election victory. The benchmark index’s gains on Friday also ended five straight days of losses – the longest such streak since April.

The tech-heavy Nasdaq Composite rose 1.8 percent, helped by a more than 8 percent rise in electric vehicle maker Tesla, whose shares slid a day earlier after announcing its initial public offering First decline in annual vehicle deliveries in more than a decade. The semiconductor giant Nvidia gained more than 4 percent.

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

But the day’s share price moves also came as new numbers on U.S. manufacturing activity beat consensus forecasts, boosting investor sentiment, and as Trump ally Mike Johnson re-elected as Speaker of the US House of Representatives.

“It’s really a combination – I would 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 I think at a certain point investors realize that when there are sell-offs for several days, there are buying opportunities.”

At the same time, Hooper added: “We got good news today in terms of production (numbers), and I think that certainly set a positive tone.” We had a relatively smooth election in the House of Representatives, which also contributed to a more positive mood .”

The ISM manufacturing purchasing managers’ index was at 49.3 for December on Friday – below the 50 threshold that marks expansion, but above economists’ forecasts and above 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 it helps reduce political uncertainty,” said Dec Mullarkey, managing director of SLC Management.

Referring to the group of Big Tech names that now dominate the US stock market, he added: “The Magnificent Seven in particular remain resilient, even when valuations are high.” Investors remain confident that “The high expenditure on (artificial intelligence) investments will pay off and secure a first-mover advantage.”

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

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

“Let’s face it: There is more uncertainty, and as we get closer to January 20 (the day of Trump’s inauguration), I think there will be more question marks about what the new administration is likely to bring.”

Additional reporting by Will Schmitt

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