Light volume ahead of a holiday-shortened trading week led to a mostly uneventful session for equities. As per usual, a handful of mega-cap tech names did much of the heavy lifting amid a smattering of economic news and little in the way of corporate catalysts.
Two of the three main equity benchmarks saw their relative volume plunge by about half on Monday, which isn’t unusual during this time of the year. As a reminder, markets close early Christmas eve, and both the bond and equity markets have different holidays hours throughout the year.
Furthermore, as for macroeconomic data, the economic calendar is light during the holidays. The corporate earnings calendar tends to quiet down too.
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It’s normal for things to slow down this time of year, but when volume declines on the major exchanges, this means there is less liquidity. Don’t panic if you see volatility pick up amid light volume.
It’s also not unusual to see the year’s biggest and best performing stocks gain upside momentum in late December. Sometimes professional investors chase winners to put window dressing on their returns before year-end.
Economic news in focus
As for Monday’s session, there was little in the way of economic news to move markets.
Orders for durable goods fell last month, hurt by lower purchases of aircraft. Boeing (BA), a Buy-rated Dow Jones stock, has been struggling with its commercial aircraft division, among other issues.
“The passenger airplane, defense jet, fabricated metal products, computer and electronic products, and motor vehicle and part categories saw transactions drop 7%, 2.6%, 1.6%, 0.7%, and 0.3%, respectively, during the period,” writes José Torres, senior economist at Interactive Brokers.
In better news, business investment finally jumped, the economist notes. “Non-defense, capital goods excluding aircraft segment, a proxy for business investment, posted its sharpest monthly gain in over a year,” Torres adds.
In other econ news, consumer confidence unexpectedly dropped in December to 104.7, according to the Conference Board’s Consumer Confidence Index. That missed economists’ expectations for the score to hit 112.9 and represented a steep drop from November’s reading of 112.8.
Lastly, sales of new homes rose 5.9% last month to a seasonally adjusted annualized units (SAAU) rate of 664,000, according to the U.S. Census Bureau. That topped forecasts for 650,000 units, and represented a sharp reversal from the prior month.
Tech stocks led the charge Monday, especially members of the Magnificent 7.
Nvidia (NVDA, +3.7%), Alphabet (GOOGL, +1.7%), Tesla (TSLA, +2.3%) and Meta Platforms (META, +2.5) helped prop up the cap-weighted benchmarks. Semiconductor stock Broadcom (AVGO, +5.5%) also chipped in.
At the closing bell, the blue chip Dow Jones Industrial Average added 0.2% to 42,906, while the broader S&P 500 gained 0.7% to 5,974. The tech-heavy Nasdaq Composite rose 1% to 19,764.
Are high-yield dividend stocks safe?
Dividend investors should know that blindly buying stocks with the highest dividend yields can be a dangerous game. Indeed, an unusually high dividend yield is often a warning sign. That’s because stock prices and dividend yields move in opposite directions. It’s possible that a too-good-to-be-true dividend yield is simply an effect of a stock having lost a lot of value.
And anytime a company’s stock is slumping badly, it’s worth wondering if its dividend is sustainable at current levels.
S&P 500 components suspend or cut their dividends sometimes. It’s a sad fact of investing life. Even the best stocks for dependable dividend growth can occasionally let a long-term income investor down.
That said, the stocks in the S&P 500 with the highest dividend yields include some Buy-rated blue chips. Verizon Communications (VZ), one of Wall Street’s top Dow Jones stocks, has raised its dividend annually for two decades. Meanwhile, Pfizer (PFE) has a 15-year track record of consecutive hikes to its payout.
Sometimes a high dividend yield is indeed too good to be true. But Wall Street analysts say some of the top-yielding stocks in the benchmark index are high-conviction Buys. Take a closer look at what the Street has to say about the S&P 500 dividend stocks with the highest dividend yields.