Stocks edge up after weak start to 2019
The first day of trading for 2019 on Wall Street was much like the last couple of months of 2018 -- a roller-coaster ride amid ongoing concerns about global growth. And it wasn't until Wednesday's final minutes that confirmed the day would end with a gain, albeit slight.
After falling 300 points in morning trade, the Dow reversed and rose 85 points just before 2 p.m. Eastern time and wound up 19 points higher, or 0.1 percent, on the day. The S&P 500 also picked up 0.1 percent, and the tech-heavy Nasdaq notched a 0.5 percent increase.
Stocks ended 2018 in the red, a loss not seen since the height of the financial crisis a decade ago. The market gyrations have left investors both poorer and apprehensive about what's to come, with some analysts questioning whether 2019 could usher in a "bear" market or even another U.S. recession.
President Donald Trump on Wednesday told reporters the recent slump in stocks is a "glitch," and he predicted that markets would rebound when the U.S. and China iron out their trade disputes.
On Wednesday, a Chinese government survey and one by a major business magazine showed manufacturing in China weakened during December as global and domestic demand cooled. Forecasters said that could send shockwaves through other economies, particularly in Asia, that supply raw materials and components. Chinese export growth has held up as producers rushed to fill orders before possible new U.S. tariff hikes take effect as Washington battles with Beijing over trade. But forecasters said that effect may be fading.
"Global markets have started 2019 off on a quiet but downbeat note," TD Securities analysts said in a note. "Weaker Chinese data and the ongoing U.S. government shutdown add to a cautious tone."
U.S.-Chinese talks
Investors are looking ahead to talks this month aimed at settling the U.S.-Chinese dispute that threatens to dampen global economic growth. Presidents Donald Trump and Xi Jinping agreed Dec. 1 to a 90-day suspension of further tariff hikes in their fight over Beijing's technology policy but left in place penalties already imposed. No date for the new talks has been announced, but both sides have expressed interest in a settlement.
Economists said the 90-day window is likely too small to resolve the full range of issues that bedevil the two countries' relations. Mihir Kapadia, CEO of Sun Global Investments, said the uncertainty in financial markets will "continue until further clarity emerges from the U.S. and China talks."
The Chinese slowdown "raises a few red flags," said Mizuho Bank's Vishnu Varathan in a report. The slide is "potentially symptomatic of far sharper underlying demand pullback," he said.
2018's wild ride
Last year concluded in an almost polar-opposite mood to 2018's earlier frothy optimism, when President Donald Trump's tax cut was projected to boost consumer spending, supercharge corporate profits and burnish investor portfolios. When the Dow jumped 5 percent in January, Mr. Trump touted his policies' impact on the market and broader U.S. economy.
However, the market started selling off in October amid heightened fears about Mr. Trump's trade war with China and the Federal Reserve moving to gradually raise interest rates to keep the economy from overheating. The latter led to a series of blistering attacks by the president on Fed Chairman Jerome Powell, whom Mr. Trump accused of roiling markets.
On top of those worries, investors are also fretting about a slowdown in U.S. and global growth, America's ongoing government shutdown and even the risk of a possible recession.
"The U.S. economy is running out of stimulus steam," Morgan Stanley economist Ellen Zentner said in a report, noting the impact of fading fiscal stimulus from tax cuts last year and rising interest rates in the U.S. and elsewhere around the globe.
The investment bank expects the U.S. economy to expand 1.7 percent this year, a forecast that's sharply lower than 2018's roughly 3 percent growth rate.