After The Close - Stocks opened the week sharply lower in holiday-shortened trading. The New York Stock Exchange concluded business at 1:00 p.m. EST on Monday, ahead of Christmas Day tomorrow, when the market will be closed.
Unfortunately, the mood on Wall Street lately has been anything but jolly and, barring a last-minute rally, stocks are on track for their worst December in many years.
The causes for the bearish sentiment are numerous and well-documented, ranging from fears of slower global economic growth, rising interest rates, and the discord in Washington D.C.
For their part, investors appear to have hit the pause button when it comes to buying stocks. Instead, the thinking seems to be to wait out the downturn, and perhaps get in when the market shows clearer signs of having bottomed out.
At the closing bell, the Dow Jones Industrial Average tumbled 653 points; the S&P 500 fell 65 points; and the NASDAQ lost 140 points, or less on a percentage basis than the Dow or the S&P. Decliners easily outpaced advancing issues and many more stocks hit 52-week lows, reflecting the market’s recent weakness.
Curiously, one of the hurdles today turned out to be Treasury Secretary Mnuchin’s efforts to calm the markets by communicating that he had spoken to the heads of major banks and they had assured him there was ample liquidity for lending. Wall Street generally had not been thinking there was a shortage of liquidity.
Stocks briefly did come off of their session lows on word that a major hedge fund manager was buying a few stocks, but the wait-and-see tone largely held in place.
In other markets, crude oil quotations continued their slide. Prices for the benchmark domestic blend dropped more than $1 a barrel, to under $45, on concerns of too much supply and not enough demand. OPEC has pledged to reduce production by more than one million barrels a day beginning in January. Over the weekend, the cartel noted that it might cut more, if necessary.
Most likely, OPEC’s initiatives will go a long way toward cleaning up oversupply issues in 2019, although prices have continued to fall in the meantime. The plus is that consumers are benefiting through lower prices at the gasoline pump.
The markets will reopen for business on Wednesday. In the meantime, we sincerely wish all of our readers a very Merry Christmas and a happy holiday. - Robert Mitkowski
At the time of this writing, the author did not have positions in any of the companies mentioned.
12:30 PM EST - Another day, another sharp downdraft for the stock market. To wit, after stocks opened lower, with the Dow Jones Industrial Average quickly falling to a loss of more than 400 points, stocks rebounded to pare that initial deficit to fewer than 150 points,. However, that was but a brief respite, and stocks have now fallen anew, with the Dow now again down more than 400 points once again. In the process, that index has fallen below 22,000.
Meanwhile, the S&P 500 likewise has dropped sharply and is on the cusp of a bear market, while the Dow is not far behind. Earlier last week, the NASDAQ had entered bear market territory, that is a drop of over 20%. It is not pretty out there.
And it is the same story, worries about our economy, corporate earnings, the international trade situation, high-profile resignations in Washington and now new worries after the Treasury Secretary called several bank CEOs to reassure them about the health of the financial system. - Harvey S. Katz.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Before The Bell - Christmas Eve has arrived, and the Santa Claus rally has been nowhere to be found. In fact, this is anything by a heart-warming December to date, with these 31 days, historically the best month of the year for equities, currently being the worst such late-year span since the Great Depression. All told, the Dow Jones Industrial Average, the S&P 500, and the NASDAQ are deep in correction territory as we enter the final week of 2018. What's engendered this poor performance? The reasons are clear, as they include trade disputes with China, fears of a slowing U.S. economy, rising interest rates, and intensifying political headwinds in Washington.
Specifically, the Dow, up to near 27,000 in early October, is now below 23,000. This plunge came largely this month, with the latest concerns, a surprisingly restrictive Federal Reserve and worries about the partial government shutdown, pushing the equity market down notably last week. As to the latest session, it began hopefully, as the Dow quickly ran out to a better-than-300-point advance, fueled by bargain hunting following the declines of the past few sessions. The bounce also evolved after comments by the President of the New York Fed that the central bank could reassess its interest-rate policy if the economy slows more than expected.
But the Street could not sustain the early gains, and as we hit the noon hour, the aforementioned 300-point plus rise in the Dow had turned into a more than 200-point decline--a negative swing of 500 points. The Dow would spend the next two hours drifting back and forth between 100 and 200 points lower. However, it was the NASDAQ where the big downward action was taking place. That index, which earlier in the week had entered bear market territory (that is, a peak-to-trough drop of 20%, or more) tumbled by another 160 points in early afternoon. In all, the NASDAQ, which peaked at 8,133, now has lost more than 1,700 points.
As to the economy, data issued earlier in the day by the government showed that personal income and consumer spending both had increased in November, with the former climbing by a modest 0.2% and the latter rising 0.4%, both of which were fairly close to expectations. At the same time, the Commerce Department also reported that third-quarter gross domestic product had gained 3.4%. That was the last revision and was down by 0.1% from the earlier estimated 3.5% gain. Neither report did much for the market one way or the other, as eyes were fixed on the looming government shutdown.
Meantime, one stock that did help the stock market was NIKE (NKE – Free NIKE Stock Report). That Dow component was up over 7% in late afternoon, as the apparel maker reported strong earnings for the latest quarter. But that was not enough to relieve the unrelenting weakness in the popular averages. At this time, both the Dow and the S&P 500 are on track for their worst December since 1931 and the worst month, in general, for the market since early 2009, or just before the averages bottomed out following the long bear market. AS to the market setback on Friday, the Dow broke below the 200-point mark by later in the afternoon.
The selling then would continue into the close, with the Dow falling to a session-worst decline of 463 points before ending off by 414 points. The loss on the S&P 500 was 51 points, while the NASDAQ shed just under 200 points. Breaking things down, all 10 of the leading equity sectors fell back, les down the losing path by technology and consumer cyclical stocks while the NYSE saw losing equities overwhelm winning issues by almost four-to-one. All in all it was the worst week for the Dow in a decade, with that index now within striking distance of a bear market.
Now, a new week begins and after the massive selloff last week in New York, we see that stocks were generally lower in Asia overnight, while in Europe, the bourses are tracing mostly downward pattern. Elsewhere, oil, in its own bear market, is trending lower again at this hour, while Treasury note yields, which crept up a little on Friday, are now backing off somewhat. Finally, the U.S. equity futures suggest that we will head downward at the start of today's pre-holiday shortened session (the stock market closes at 1:00 PM EST). Stay tuned for what may again be a volatile day and week as we wish our loyal readers the happiest of holiday seasons. - Harvey S. Katz, CFA