Stock markets are open much of this holiday week, but that doesn't mean traders expect much to happen. A period of peaceful reflection may be just what the doctor ordered after last week's ups and downs.

The Dow Jones Industrial Average, the S&P 500, and the Nasdaq all rallied more than 1% on Friday after the latest data from the Federal Reserve's preferred inflation gauge came in softer than expected. Still, that's not enough to make up for the drops seen after the Fed said Wednesday there will probably be fewer interest-rate cuts next year than previously anticipated.

This week shouldn't be nearly as dramatic. The stock exchange is only open for a half day on Tuesday and is shut completely on Wednesday. A consumer confidence reading and jobs report bookend the week on Monday and Thursday. After a government shutdown was averted on Saturday with a stopgap spending bill that keeps funding going through March 14, everything is lined up for traders to ease into the new year.

Don't expect the calm to last, though. Looking back, 2024 has been very good for stocks, with the S&P 500 up more than 20% for the second year in a row. While another 20% certainly isn't impossible in 2025, there are nagging doubts about the outlook.

A year from now, we may look back on this period as peak optimism for what the incoming Donald Trump administration can do for companies--plans for lighter regulation and lower taxes may not be able to meet the very high expectations.

The Fed may also disappoint in 2025. There's a decent chance that the central bank won't reduce borrowing costs at all, and may even need to raise rates, according to Apollo chief economist Torsten Sløk.

For now, we can enjoy a quiet week. But brace for some tumult to return.

-- Brian Swint

*** Join Barron's senior managing editor Lauren R. Rublin and deputy editor Ben Levisohn today at noon when they talk with Ed Yardeni about his Roaring 20s thesis, and his 2025 market outlook. Yardeni, president of Yardeni Research, has predicted the economy will "roar" through the 2020s and perhaps into the 2030s, propelled by productivity growth. It's a bullish recipe for markets, too. Sign up here.

***

Honda, Nissan Confirm Merger Plan. But Not Until 2026.

Honda and Nissan, two of Japan's biggest auto makers, confirmed plans to merge in a deal that would create the world's third-largest carmaker by annual sales. The potential tie-up is a long time coming. In March, the pair announced they had started a "feasibility study or strategic partnership."

   -- After reports of merger talks surfaced last week, the car companies 
      signed a memorandum of understanding to explore synergies and integrate 
      their businesses through establishing a joint holding company, they said 
      in a statement. 
 
   -- "At this time of change in the automobile industry, which is said to 
      occur once every 100 years, we will be able to become a leading company 
      in creating new value in mobility through business integration," said 
      Honda CEO Toshihiro Mibe. 
 
   -- Neither company is listed in the U.S., but they both have American 
      depositary receipts that track their shares. 

What's Next: The move comes as traditional auto makers cope with falling sales, slumping share prices, and increasing competition from electric vehicles. Honda and Nissan plan to complete the merger in August 2026.

-- Elsa Ohlen

***

Government Funding Drama Offers Glimpse of Next Congress

Lawmakers on Sunday discussed the last-minute funding agreement that narrowly avoided a federal government shutdown late Saturday, but didn't give President-elect Donald Trump the measure he wanted to eliminate or raise the debt ceiling. President Joe Biden signed the agreement on Saturday.

   -- Tesla CEO and Trump advisor Elon Musk helped torpedo Speaker Mike 
      Johnson's first funding extension proposal, criticizing it in numerous 
      social media posts and threatening lawmakers who supported it. Trump on 
      social media had called on Republican lawmakers to raise the nation's 
      debt ceiling during Biden's term. 
 
   -- Johnson tried three times to cobble together the votes to extend 
      government funding through mid-March, and Trump demanded that Republican 
      lawmakers reject the first proposal. Republicans will have slim 
      majorities in both chambers next year, and 38 House GOP members rejected 
      Trump's debt ceiling demand. 
 
   -- Sen. Chris Coons (D., Conn.) told CNN that in addition to Trump 
      "rage-tweeting," Musk is also "injecting instability" into complicated 
      and important issues. Former New Jersey Gov. Chris Christie told ABC that 
      Musk's influence over policymaking will end when Trump needs someone to 
      blame and Musk is the person he picks. 
 
   -- Trump told the conservative AmericaFest conference in Phoenix on Sunday 
      that charges for passage through the Panama Canal were "ridiculous," and 
      he may demand the return of the waterway to U.S. control. He also said 
      Musk wasn't a shadow U.S. president, as critics have suggested, noting he 
      is foreign-born. 

What's Next: Republicans have shown a willingness to exert that pressure on Trump. Intraparty conflict, and prominent voices such as Musk, could make passage of Trump's roughly $8 trillion economic agenda harder, tripping up hopes that Trumponomics will charge economic growth.

-- Liz Moyer, Janet H. Cho, and Matthew Peterson

***

IPO Market Solid, but Wall Street Sets Hopes on 2025

Wall Street's lucrative engine for initial public offerings picked up in 2024 but still lagged behind historical standards, according to Renaissance Capital. Companies postponed offerings amid interest rate uncertainty and market volatility. The banking industry is hopeful for a pickup in IPO and other business in 2025.

   -- The 146 U.S. debuts in 2024 raised $29.6 billion. That's a more than 50% 
      increase in proceeds compared with 2024, but deal flow was still slow 
      historically and skewed larger, Renaissance Capital said. Some 58 of the 
      IPOs raised $100 million or more, nearly double 2023's count. 
 
   -- Five firms raised $1 billion or more, led by cold storage REIT Lineage, 
      which raised $4.4 billion, Renaissance said. Large IPOs of $100 million 
      or more averaged a 26% return from their offering dates, compared with a 
      3% loss for the broader group of all 2024 IPOs. 
 
   -- Venture capital-backed tech picked up, Renaissance said. The difference 
      between private market valuations and public markets kept many tech 
      unicorns on the sidelines, but deals by social media site Reddit and 
      others could be a sign of a resurgence ahead, the IPO research firm said. 
 
   -- Deals by special purpose acquisition companies, or blank check firms, 
      stabilized this year. New SPAC issuances rose to 55, while merger 
      activity dropped to 69, including the merger of Digital World Acquisition 
      Corp. and Trump Media & Technology Group. 

What's Next: Some 210 firms filed for IPOs this year, boding well for the market in 2025. Already, there are 110 companies in the active pipeline that have filed or updated their filings in the past 90 days. By sector, industrials lead, followed by tech and consumer discretionary, Renaissance said.

-- Liz Moyer

***

-- Newsletter edited by Liz Moyer, Brian Swint, Rupert Steiner, and Adam Clark

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

December 23, 2024 06:44 ET (11:44 GMT)

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