After The Close
The futures markets started modestly higher, as a rebound from an unsettled economic and market outlook continued. However, the markets fell in the early portion of the trading session, with the Dow Jones Industrial Average dropping more than 150 points from the prior close. Still, much of the day could be characterized as a series of higher highs and higher lows. In all, the Dow rose by as many as 243 points at its apex. The S&P 500 and NASDAQ also followed suit. It should be noted that trading volumes were light at the end of the holiday week. Still, this uptick could not be sustained, and the final move in trading brought the indices to a lower close. All told, the Dow closed down 76 points and the S&P 500 finished off 3 points.
Additionally, advancers and decliners were not far apart today. Meantime, healthcare stocks were among the best performers on the day, while energy-related issues were among the weakest, as were some food concerns.
In other news, U.S. Treasury yields continued to decline, though only slightly, as demand for bonds rose. Meantime, it appeared that most other asset classes were higher on the day, including oil prices. These likely benefited from a fall in the price of the U.S. dollar. However, the VIX Volatility Index was lower throughout the session, as demand for option protection fell.
Looking ahead, next Monday will mark the final trading session of 2018. As things stand now, the indices will post material losses in 2018. Also, the markets will be closed on Tuesday for the observance of New Year’s Day. The rest of the week will be light on both economic and earnings reports, with the former likely affected by the partial government shutdown, suggesting that news developments will drive most of trading.
- John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
Following that buying burst, there were expectations that we might see an encore yesterday. However, right from the opening bell, the market fell back and did so notably, with the Dow off by more than 450 points in the first hour of trading. The blame seemed to be coming, in part, from renewed trade tensions between China and the United States. According to sources familiar with the trade matters between the two economic powerhouses, the President was considering an executive order to ban U.S. companies from using equipment built by two major companies out of China.
Meanwhile, on the economic front, a key report issued yesterday morning, and undoubtedly a contributor to the renewed reversal, showed that consumer confidence, a major underpinning for both the long bull market and the strong economic expansion, took a hit this month. Specifically, the Conference Board, a private research group, noted that its closely tracked survey had fallen from 136.4 in November to 128.1 this month. Now, that is still a formidable figure, but it is not at the levels of recent months, in part we sense, because of the recent turmoil in the stock market and in Washington.
So, stocks continued to drift lower, with the Dow largely holding onto deficits of 250-500 points for the balance of the morning and into the early afternoon. In fact, as the lunch hour ended and the mid-afternoon commenced, the blue chip index's range narrowed to between 350 and 450 points. Then, as we moved inside the final two trading hours we saw some further selling for a time, which brought the Dow down to a loss of some 600 points. Our sense is that Monday's major selloff was an overreaction to the downside, while Wednesday's comeback was overdone to the upside. Now, we are adjusting still further.
Clearly, the stock market has problems, which range from such vexing issues as the trade impasse with China and fears of a slowing global economy. These have been with us for much of the final quarter. More recently, the worries have included, as well, concerns about a moderating economy on our shores, the recent government shutdown, which seems to have no end date, and a sense that the Federal Reserve could yet err on being overly aggressive in its monetary tightening efforts. The recent criticism of the Fed Chair Jerome Powell by the White House has only made matters more concerning.
The market then continued to hold in the loss column as the afternoon moved along. However, as we entered the final half hour of trading, a buying surge, similar to Wednesday's, occurred, which would wipe out the market's once-formidable deficit. It seems that the selling earlier in the week and then again for much of yesterday had shaken out enough of the weaker buyers to make at least a modest case for getting back into the fray. The buying then would continue right into the close, with the turnaround occurring even as hopes for an end to the near week-long partial government shutdown faded further.
At the close of the session, the Dow, once off by 600, or so points, had managed to ink a triple-digit point advance, gaining 260 points to end matters above 23,000. A positive close, albeit of more modest proportions, was secured by the S&P 500 Index, while the NASDAQ managed to edge into the plus column by session's end. All told, the Dow would make a negative-to-positive swing of more than 850 points. It was a very bullish and encouraging finish to what had been a negative session of some note until very late in the day.
Now, the week concludes, with stocks in Asia moving mostly higher overnight, following the late and rather narrow win in New York yesterday. In Europe, meantime, the major bourses are rising thus far this morning. In other markets, oil, lower again yesterday, is trading with up so far today, while yields on the 10-year Treasury note are edging higher. Finally, after yesterday's late fireworks, the U.S. equity futures are suggesting a higher start to the final trading day of the week and the penultimate session of 2018. It should be another wild ride.
