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After The Close - Stocks were higher on the final day of trading in 2018 on optimism that trade talks with China will prove fruitful. At the closing bell, the Dow Jones Industrial Average was up 265 points; the NASDAQ gained 51 points; and the S&P 500 was 21 points higher. The broader market followed suit, with gainers handily outpacing declining issues.

The positive sentiment stemmed from word from the White House that negotiations with China over trade and tariffs were making progress, as well as signs that a deal may be taking shape to reopen parts of the U.S. government currently shut down.

In addition, there is a feeling that stocks are now inexpensively valued following their recent selloff.

Among the stock market’s major sectors, shares of healthcare and consumer discretionary companies fared the best.

There was little in the way of economic news on the day, although the Dallas Federal Reserve did release its manufacturing survey, which showed modest growth but a slumping outlook. The report reflects data from a key oil-producing region of the country, where it seems lower oil prices are starting to affect business prospects.

On the day, crude oil prices for the domestic benchmark were under $46.00 a barrel in New York trading. That is a far cry from the $76.00 a barrel in effect at the beginning of October, when fears of oversupply started to take hold.

In terms of the stock market, 2019 earnings estimates for oil producers could come down further if quotations do not recover before too long.

Elsewhere, bond prices rose in shortened trading. The yield on the benchmark 10-year Treasury note fell to 2.68% from 2.74% (yields move inversely to prices). As with a number of markets, there has been a notable shift in sentiment in recent weeks. The yield on the 10-year T-note was near 3.25% as recently as the second week of November.

The renewed interest in bond buying reflects the uncertainties investors are confronted with these days. Those concerns led to moderate declines in the stock market’s major averages in 2018.

On the bright side, stocks rarely pull back two years in a row, potentially auguring well for 2019 if resolutions to ongoing issues can be worked out. 

The markets will be closed tomorrow for the New Year’s Day holiday and trading will resume in full on Wednesday.

We wish all of our readers a happy, safe, and prosperous 2019.  - Robert Mitkowski

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

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Before The Bell - As one of the more hectic weeks, in a very hectic year, for Wall Street drew to a close on Friday, there was a surprise diminution in stock market volatility. That is not to say that things were entirely stable. To wit, there still were some swings. But after suffering the largest point drop ever for a Christmas Eve in the Dow Jones Industrial Average this past Monday, then enjoying the biggest point gain in the 122-year history of that composite on Wednesday--with the Dow surging by 1,086 points--and seeing one of the biggest intra-day reversals ever the following day, things finally settled down a notch to close out the week.  

To recap, with little news of note to point to, the stock market opened modestly higher on that penultimate session of the trading week and year. However, the advance, albeit modest, also was short-lived, with the averages staying positive for just a brief span, falling into negative territory shortly thereafter, rebounding again, faltering anew, and ending the morning in the green, to the tune of about 70 points in the Dow Industrials. It was an admittedly small move in light trading by an investing public that seemed to be exhausted by a grueling week of trading.    

In all, it has been a difficult quarter and month for Wall Street, as well as a volatile stretch. In fact, going into Friday, there were double-digit losses for the Dow (12.5%), the S&P 500 (14.6%), and the NASDAQ (18.2%) during the closing three months of 2018. As for the Dow, to that point, there were just five stocks showing gains for the final period, with just one issue Procter & Gamble (PG Free P&G Stock Report) gaining as much as 10%. It has been a tough conclusion to a most challenging 12 months for the stock market. Worse than the large caps, meantime, the Russell 2000, the small-cap benchmark, was off 21.5% for the quarter through December 27th. 

The stock market then spent the next couple of hours meandering about, at first reversing course and falling by some 100 points in the Dow, and then going positive in that index to the tune of about 200 points. That advance would then wither for a time, but the market would remain in the plus column, with the gains spread across the major indexes, including the aforementioned struggling Russell 2000. As for stock market sentiment and direction, little had changed in the past week, with the government still partially shuttered, with the partisan divide in Washington only getting wider, and with economic and monetary worries persisting.

In truth, there has been little of note going on during these final days of December, with even some key economic releases, such as data on new home sales, not coming out because of the government shutdown. So, investors already concerned about the future direction of the aging business expansion, were even more in the dark as pivotal issuances have not been forthcoming in some cases. Also, with volume light, as many traders and investors are on vacation, daily and hourly moves can be even more pronounced. Suffice it to say, there is little to suggest that the next few days ands even weeks will be less hectic.

Meanwhile, the stock market could not sustain its late rise and would revise course yet one more time to close the session with modest losses, thereby ending a hectic and historic week with a modest final-session decline, led by a 76-point drop in the Dow. For the week, a frenetic stock market closely nicely higher. Next week, meantime, also could be volatile, as a new year gets under way with new positioning and, possibly, some delayed government economic issuances should the partial shutdown persist. This is a trying time for investors and one that we think calls for a sense of perspective and calm.

Looking out at the final market session of what has been a most difficult year for stocks globally, we see that Asia chimed in with a generally mixed showing. Things are little better on the Continent, meantime, with equities there showing little aggregate strength so far today. In other markets, oil is higher and Treasury yields are beginning the final day of 2018 with nominal losses. Finally, on some optimism about U.S.-China trade relations, our equity futures are showing early strength, suggesting a strongly higher open when trading resumes shortly. Finally, we take this opportunity to wish all of our loyal readers a happy and healthy new year in 2019.  - Harvey S. Katz, CFA

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