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After The Close - The futures markets started lower today, as China’s manufacturing contracted slightly in December, causing new fears about a global growth slowdown. In addition, a report that the lead U.S. trade representative, Robert Lighthizer, stated the U.S. may need to add more tariffs to China-produced goods, hurt market sentiment. These factors partially caused the Dow Jones Industrial Average to fall by almost 400 points in early trading, and the S&P 500 to trade lower by around 40 points. However, prices started to recover steadily, as sentiment rose concerning a trade deal with China. This helped the indices to gain back all of their early losses, and nudge in to the plus column. Still, prices tailed off a bit in choppy trading during the final portion of the day, as this improvement in sentiment faded. All told, the Dow rose by around 19 points and the S&P 500 was higher by three points.

Overall, advancers outpaced decliners by a 1.8-to-1.0 ratio, suggesting a broad move higher. Energy stocks were among the strongest performers of the day, aided by better commodity prices. On the other hand, interest-rate sensitive REIT stocks were among the weakest performers.

In commodity news, oil prices rebounded today, as a news report stated that Saudi Arabia exports dropped by around a half million barrels per day in December. Meantime, U.S. Treasury bond yields were largely lower on the day, though the two- and five-year notes recorded an interest-rate inversion. Historically, this has been a negative indicator on the stock market. Meantime, the VIX Volatility Index finished the session lower, as demand for option protection fell.

Looking ahead, tomorrow should be full of economic news, as several reports, including total vehicle sales for December, will be released. Other reports include the ISM manufacturing index for December and initial jobless claims for the latest week. However, the earnings calendar is somewhat empty, suggesting that trade and global news will drive trading on Thursday. - John E. Seibert III

At the time of this article’s writing, the author did not have positions in any of the companies mentioned. 

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Before The Bell - Investors, who had a difficult 2018, notwithstanding a better close on December 31st, will soon hit the trading pits again. In all, even with the modest comeback over the past several sessions, the stock market had its worst year in a decade with appreciable losses tallied across the board. In all, the downdraft was led by the technology driven NASDAQ and the small-cap Russell 2000. High valuations, coupled with a string of vexing global and domestic problems contributed to the year's poor showing.

Meanwhile, the year's final session was a volatile one. The day started out notably to the upside, with the Dow Jones Industrial Average jumping out to a morning-best increase of some 250 points on renewed optimism voiced by the President on hoped-for progress with China on trying trade matters. However, after that early buying burst, stocks settled back some, with the gains easing gradually, so that as we approached the noon hour in New York, the S&P 500 Index and the NASDAQ both had edged into the red briefly.

As noted, though, the backsliding was brief, so that as the afternoon began, the three major averages were all back comfortably in the green. (In truth, however, the Dow remained positive throughout.) Things would then brighten further as the afternoon proceeded, with the Dow maintaining gains in the 100-200-point range until the final few minutes of the trading year, when a sudden buying frenzy erupted just as the final bell sounded, which enabled the three large-cap indexes to close at their session highs.

When all the numbers were in, the Dow, with that final burst would end the session higher by 265 points. The final tally would still leave the 2018 closing tally of 23,327 off the all-time high by some 4,600 points. Gains of 21 and 51 by the points, respectively, were booked by the S&P 500 and the NASDAQ, respectively. The Russell 2000, a noted laggard for the 12 months, also would end higher, rising by 11 points, even as it concluded the year with one of the poorer showings, off by more than 20%.

However, the late push aside, the major indexes all put in their worst performance for a year since 2008. All told, the Dow ended 2018 with a loss of 6.0%, while the S&P 500 dropped 6.2%. The tech-driven NASDAQ, a big winner until late in the year, ended matters behind by 4.4%. Among the problems, which really took big toll down the home stretch this past year were trade disputes with China, the fear of an eroding global economy, concerns about easing growth stateside, worries about the Fed, and the mounting investigations in Washington.

Looking out to 2019, the market faces a challenging economic backdrop in China, where manufacturing is now in decline. That setback could be in response to our toughening trade policies. The headwinds in China, plus fears that the Fed might go too far in curbing growth and inflation on our shores, and some consequent concerns about corporate profits are all causing some angst among traders in our markets. Add in the other unknowns, such as the first taste of divided government in two years and investors could well be on edge as the new year begins.

Now, in fact, that new year is beginning, and a look overseas shows that stocks were sharply lower in Asia in the overnight hours on weak data out of China, while in Europe, the major bourses are showing losses. Elsewhere, oil a major casualty late in the year, as it posted massive late losses, is now showing initial 2019 declines and Treasury note yields, which dipped below 2.69% as the 12 months concluded, are now even lower on global business concerns as 2019 gets under way. Finally, the U.S. equity futures are showing some early losses ahead of the 2019 open. – Harvey S. Katz, CFA

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.