SPY SPDR S&P 500

In the last weekU+02019s trading session, which ended on December 23, 2022, the U.S. equity markets edged higher as consumer inflation decelerated in the past month. Market participants now expect price pressures to moderate in the next few months, which might also result in lower interest rates in 2023.

In the last five trading sessions, the Dow Jones index rose by 1.9, while the S&ampP 500 and Nasdaq indices fell by 0.2% and 0.9%, respectively, as recession fears loomed large on the markets.

The upcoming week will be a short one as the markets are closed on Monday. Will a holiday-fueled Santa Claus rally drive the stock market, allowing investors to offset a portion of these losses?

Let’s see what investors can expect from the markets as we head toward the end of 2022.

Home prices data

The data for home prices in the U.S. will be published in the next week. The S&ampP 500 Global will release the Case-Shiller National Home Price Index for November on Tuesday, while mortgage originator Freddie Mac will disclose the Home Price Index data for the last month.

In October, the Case-Shiller index suggested home prices fell 1.2% in October after a 1.5% decline in September. It was the fourth consecutive month-over-month price decline.

Home prices rose 9.1% year over year in October, which was lower than the 10.4% year-over-year gain in September. It was the slowest pace of annual price gains in over two years, suggests a report from Investopedia.

Later this week, the NAR of the National Association of Realtors will release data on pending home sales for November. According to analysts, pending home sales will slump 0.5% in November and 30% from the year-ago period. Pending home sales are down in 11 of the past 12 months due to rising mortgage rates, lower inventory, and a decline in affordability.

Purchasing managerU+02019s index data remains key

A key driver of the stock market in the next week is the Purchasing Managers Index data that will release on Friday by the Institute for Supply Management. The PMI tracks manufacturing activity across the midwestern region in the United States.

PMI in Chicago is likely to fall after it touched 37.2 points in November compared to 45.2 points in October. The PMI reading for October was the lowest in more than two years when the onset of the COVID-19 pandemic resulted in lockdowns and a slowdown in economic activity. Typically, a PMI reading of less than 50 suggests a contraction in business activity.

What next for the S&ampP 500?

The S&ampP 500 index entered the bear market territory in September 2022 and is currently down 19.8% year-to-date. There is a small chance of the index gaining momentum from a Santa Claus Rally due to investor optimism just after Christmas.

The markets are moving lower in December, but the current month has historically been among the most-strongest months for equity investors. Since 1950, the S&ampP 500 index has moved up by an average of 1% in December. Further, in the last five trading days of December and in the first two trading days of January, the index has gained 1.3% on average in this period.

An Investopedia report states, “There is no definitive explanation for why stocks tend to rise at the end of the year, but some theories posit that holiday shopping, seasonal optimism, and institutional investors settling their books could have helped fuel the trend.”

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