S&P 500 Index, Dow Jones Industrial Average Post First Annual Losses in Three Years

The major stock indexes posted their worst yearly performances since the financial crisis of 2008-2009. For the year, the S&P 500 Index and the Dow Jones Industrial Average were down 6.2 percent and 5.6 percent respectively. The NASDAQ Composite lost 3.9 percent in 2018.
James Hyerczyk
Red chart

The major U.S. stock indexes finished higher on Monday ending a tumultuous year in which the markets reached all-time highs only to give back all of its gains to finish with its worst annual performance in ten years. Stocks were supported by positive tweets from President Trump regarding the trade negotiations between the United States and China.

On Monday, the benchmark S&P 500 Index settled at 2506.85, up 21.11 or -0.80%. The blue chip Dow Jones Industrial Average finished at 23327.46, up 265.06 or +1.08% and the tech-based NASDAQ Composite ended the session at 6635.28, up 50.76 or +0.70%.

President Trump sparked the early buying on Monday when he said this week-end he had a “very good call” with Chinese President Xi Jinping to discuss trade. Trump also claimed that “big progress” was being made on this front.

In his tweet, Trump said, “Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!”

Gains may have been limited however by a report in The Wall Street Journal, which said Trump may be overstating how much progress was being made. The Journal cited people familiar with the situation. According to a deal struck between the U.S. and China on December1, the two economic powerhouses have until March 1 (90 days) to try to work out their differences on trade.

Some professionals are also expressing concerns over the current trade dispute that may finally be exerting a negative impact on the economy.

According to Nicholas Colas, co-founder of DataTrek Research, “The threat of an escalating trade war has chilled US business confidence, with managers uncertain as to if/how they should restructure global supply chains.”

“The most bullish case here is that the tariff issue will be settled in Q1 2019, and a meaningful resolution should be enough to trigger a first half rally for stocks,” Colas added. “Against that optimistic take are two bearish outcomes:  one, that these negotiations take longer and two, that they fail outright.”

Annual Recap

The major stock indexes posted their worst yearly performances since the financial crisis of 2008-2009. For the year, the S&P 500 Index and the Dow Jones Industrial Average were down 6.2 percent and 5.6 percent respectively. The NASDAQ Composite lost 3.9 percent in 2018.

The dramatic reversal from all-time highs was highlighted by the move in the S&P 500 Index, which posted a decline after rising in the first three quarters for the first time in history.

Broadly speaking, the S&P 500 Index and the Dow Jones Industrial Average lost ground for the first time in three years, while the NASDAQ Composite finished lower for the first time in seven years.

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