Impact of December 2024 US Economic Data Releases on Market Sentiment and Sector Rotation

This analysis examines the impact of key US economic data releases during December 22-26, 2024, on market sentiment and sector rotation as investors positioned for year-end 2024 and early 2025 [0]. The data included a revised Q3 2024 GDP (released Dec 22), November durable goods orders (Dec 24), October-November industrial production (Dec 23), and December consumer confidence (Dec 23). Markets had an early close on Dec 24 and were closed Dec 25 for Christmas [1].

Key data points showed a mixed picture: Q3 GDP was revised upward to a better-than-estimated level, driven by exports and consumer spending [1]. Durable goods orders fell 1.1% as forecast, with a 0.1% decline excluding transportation, reflecting weak business equipment demand [5]. Industrial production underperformed expectations, consistent with ongoing US manufacturing contraction [1]. Consumer confidence plummeted to 104.7 (from 112.8), missing forecasts, with the short-term expectations index dropping to 81.1—historically a recession risk signal [2][3].

Market performance reflected this mix: major indices (S&P 500, NASDAQ, Dow) rose on Dec 23-24, likely due to holiday-season sentiment and focus on the positive GDP revision [0]. Post-holiday (Dec 27), markets pulled back, indicating a reassessment of weak durable goods and consumer confidence signals [0].

Sector rotation was driven by data signals: defensive sectors like Utilities outperformed amid recession concerns [0]. Technology held ground, potentially supported by long-term growth expectations [0]. Industrials lagged due to weak manufacturing data [0], while Energy underperformed amid broader growth concerns [0].

1. Mixed data created a short-term sentiment tug-of-war
   : Initial holiday-period focus on strong GDP (positive sentiment) shifted post-holiday to weak consumer/manufacturing data (negative sentiment), reflecting a reassessment of underlying economic risks.
2. Defensive sector rotation correlated with recession signals
   : The sharp drop in consumer confidence (to recession-risk levels) directly drove investor movement into defensive sectors like Utilities.
3. Technology resilience signals long-term positioning
   : Despite short-term economic headwinds, Technology’s strong performance suggests investors maintained exposure to the sector for early 2025 growth prospects.
4. Manufacturing weakness is a sustained risk
   : The US manufacturing sector contracted for 25 of 26 months as of January 2025 [6], indicating ongoing pressure on industrial sectors.

• Consumer spending uncertainty
  : The low short-term consumer expectations index raises concerns about future spending, a critical driver of US economic growth [2][3].
• Industrial sector pressure
  : Ongoing manufacturing contraction may continue to weigh on Industrials performance in early 2025 [1][6].
• Policy volatility
  : Proposed trade tariffs and potential Fed policy adjustments added to market uncertainty heading into 2025 [0].

• Defensive sector hedging
  : Utilities and other defensive sectors may attract investors seeking protection against economic slowdown risks [0].
• Technology growth exposure
  : Long-term growth trends could support Technology sector performance despite short-term data fluctuations [0].

This analysis synthesizes the impact of December 2024 economic data on markets and investor positioning. Key data points included a revised-up Q3 GDP, weak durable goods and industrial production, and plummeting consumer confidence. Markets initially gained on positive GDP news but pulled back post-holiday. Sector rotation favored defensive sectors (Utilities) amid recession concerns, while Industrials and Energy lagged. Investors positioned for year-end with a mix of defensive hedges and long-term growth exposure in Technology.