MARKET SNAPSHOT: A Bruised Stock Market Looks To The Fed For Relief
December 09 2018 - 11:35AM
Dow Jones News
By Sue Chang, MarketWatch
U.S. stocks had worst start to December since 2008
With three weeks left until the end of 2018, both the Dow Jones
Industrial Average and the S&P 500 are mired deep in the red.
And it will be essentially up to the Federal Reserve to determine
whether the stock market will extend its winning streak for a third
year or take a breather.
Stocks have been on a wild ride recently, sandwiched between the
harsh realities of a prolonged trade war with China and hopes that
the Fed will back off from its tightening bias.
The lack of certainty on trade and policy has made for a
volatile market with the S&P 500 recording 57 sessions of more
than 1% moves year to date compared with eight in 2017.
Charlie Bilello, director of research at Pension Partners,
pointed out that the S&P 500's decline of more than 2% on
Friday was the 16th such move in 2018 versus none last year. For
perspective, he said, there were 72 in 2008.
The market's big swings are expected to continue unless there is
a quick resolution to the U.S.-China standoff, which at the moment
appears unlikely.
For a time, it looked as if the U.S. and China had reached a
truce with two countries agreeing to a moratorium on additional
tariffs in a bid to work out a trade deal. In underscoring how
important a bilateral deal is, President Donald Trump tweeted that
the two sides are in touch and negotiations are proceeding
smoothly.
(https://twitter.com/realDonaldTrump/status/1071030014123098112)
However, the newfound goodwill between the two countries did not
last long with the headline-grabbing arrest of a high-profile
Chinese tech executive
(http://www.marketwatch.com/story/huawei-cfo-arrested-in-canada-at-us-request-for-allegedly-breaking-iran-sanctions-2018-12-05)
by Canadian authorities on behalf of the U.S.
Stocks cratered on the news with the Dow plunging more than 700
points on Thursday. But in a dramatic turnaround, the blue-chip
index clawed back lost ground following a Wall Street Journal
report that the central bank could take a wait-and-see approach in
2019, an indication of how sensitive investors have become to the
Fed.
The Federal Open Market Committee is widely expected to raise
interest rates when it meets Dec. 18-19, particularly after
Friday's job report.
The U.S. economy added 155,000 new jobs
(http://www.marketwatch.com/story/us-gains-155000-jobs-in-november-and-unemployment-rate-stays-at-37-2018-12-07)
last month, below the 190,000 forecast by economists in a
MarketWatch survey. The unemployment rate, however, held steady at
3.7% while average hourly earnings grew 6 cents per hour from
October.
"December hike is a go," said Joseph Song, U.S. economist at
Bank of America Merrill Lynch, in a note to clients. "[The] job
report is consistent with what the Fed is looking for: steady job
gains, further downward pressure on the unemployment rate leading
to modest wage pressures. This should leave the committee
comfortable with raising rates at the December meeting and shift
towards greater data dependence as labor market conditions begin to
cool to more sustainable levels."
With the decision a foregone conclusion, it will be Powell's
remarks in the aftermath that carry more weight. If he strikes a
conciliatory tone and indicates that the Fed may slow the pace of
rate increases, it could help to fuel the much anticipated Santa
rally.
Next week, investors will get a better read of inflation with a
series of data on the consumer prices slated for release.
"The human mind feels most comfortable if there is a logic to
what is going on in the world. This is also the case for investors
in markets. We need a story, and markets get anxious if there are
too many unquantifiable signals and no clear signs of a consistent
narrative," wrote Torsten Slok, chief international economist at
Deutsche Bank Securities, in a report.
As such, until a more concise picture emerges of where the Fed
stands on interest rates and where the trade war is headed, the
market is likely to remain in roller-coaster mode, ensuring that
investors will stay on their toes with the holidays right around
the corner.
The stock market tumbled Friday with all major indexes marking
their worst start to a December since 2008
(http://www.marketwatch.com/story/us-stocks-look-set-to-sink-ahead-of-key-friday-jobs-report-2018-12-07).
For the year, the S&P 500 and the Dow are both down more than
1% while the Nasdaq is up 1%.
(END) Dow Jones Newswires
December 09, 2018 11:20 ET (16:20 GMT)
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