Stock market today: Indexes trade mixed as markets weigh potential Santa Claus rally, rates outlook

• US stocks traded mixed on Monday as investors weighed the odds of a potential year-end rally.
• Traders also eyed the path for interest rates next year, given recent inflation data.
• Markets have a short week ahead, with trading shuttered from mid-day Tuesday through Christmas Day.

US stocks traded mixed on Monday, with investors eyeing a potential year-end rally and the path for interest rates in 2025. The S&P 500 and Dow Jones Industrial Average slumped in the early morning, while the tech-heavy Nasdaq Composite was in the green. Meanwhile, bond yields ticked higher.

Traders are waiting to see if a Santa Claus rally will appear this year despite the shortened trading week and the recent stock selloff. According to the popular Stock Trader's Almanac, a stock surge is typical for the last five trading days of the year and the first two days of the following year.

"Santa Claus rally could still be alive, with strong seasonality into the end of the year," Ned Davis Research strategists wrote in a note on Monday. "The S&P 500 looks short-term oversold and excessive optimism has been relieved."

A rally through the New Year has the potential to set stocks on a bullish path in 2025, according to Sam Stovall, the chief investment strategist of CFRA Research.

"As a result, history says, but does not guarantee, that if the market starts out on the right foot, it rarely trips and falls for the full year," Stovall said.

Traders are also weighing the outlook for interest rate cuts in 2025 in light of recent inflation data. Personal consumption expenditures inflation, the Fed's preferred inflation measure, rose 2.4% year-per-year in November, slightly under expectations.

"This release confirms that underneath the surface, cracks are emerging for consumer spending and that price pressures are ebbing, adding to the odds that the Fed will ease more than the dots … imply," BCA Research said in a note.

Investors, though, remain skeptical that the Fed will aggressively ease policy in 2025. Markets are pricing in a 91% chance the central bank will keep rates steady at its January policy meeting, according to the CME FedWatch tool.

Trading on the New York Stock Exchange will end mid-day Tuesday, with markets being closed through Christmas Day.

Here's where US indexes stood shortly after the 9:30 a.m. opening bell on Monday:

• S&P 500: 5,928.29, down 0.04%
• Dow Jones Industrial Average: 42,681.60, down 0.37% (158 points)
• Nasdaq composite: 19,614.47, up 0.21%

Here's what else is going on:

• The stock market is sending a worrying signal that 2025 will be a tough year.
• Here's why currency volatility could be the market's "Achilles' heel" in 2025.
• The expected success of Blackwell means Nvidia stock has another 23% upside next year, according to Morgan Stanley.
• The market's top stocks need to keep winning to hold back a "stealth correction," according to Bank of America.